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question 42

Multiple Choice

Use the information for the question(s) below.
Vezuvo Technologies has $75 million in excess cash and no debt. The firm expects to generate additional free cash flows of $50 million per year in subsequent years and will pay out these future free cash flows as regular dividends. Vezuvo's unlevered cost of capital is 10% and there are 10 million shares outstanding. Vezuvo's board is meeting to decide whether to pay out its $75 million in excess cash as a special dividend or to use it to repurchase the firm's shares.
-A firm has $75 million of assets that includes $12 million of cash and 25 million shares outstanding. If the firm uses $12 million of cash to repurchase shares, what is the new price per share?

Definitions:

PSAB

Public Sector Accounting Board, overseeing the creation and implementation of accounting standards for public sector entities in Canada.

Financial Statements

Official records that detail a company's financial status, including balance sheets, income statements, and cash flow statements.

Statement Of Financial Position

Also known as a balance sheet, it is a financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial health.

Non-Financial Assets

Assets not in monetary form, such as property, plant, equipment, intangible assets, and inventories, which are expected to provide economic benefit beyond the current financial year.