Prada Has Nine Million Shares Outstanding, Generates Free Cash Flows

question 51

Multiple Choice

Prada has nine million shares outstanding, generates free cash flows of $40 million each year and has a cost of capital of 10%. It also has $30 million of cash on hand. Prada wants to decide whether to repurchase shares or invest the cash in a project that generates free cash flow of $5 million each year. Should Prada invest or repurchase the shares?

• A)repurchase
• B)indifferent between options
• C)invest
• D)cannot say for sure

Identify and differentiate between direct and indirect methods of preparing cash flows from operating activities.

Analyze the impact of specific transactions on the cash flow statement and its sections (operating, investing, financing).

Interpret the impact of changes in current assets and liabilities on cash flows.

Recognize the treatment of non-cash transactions in the statement of cash flows.

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Definitions:

Intellectual Development

The growth of cognitive abilities and capacities from infancy through adulthood.

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Refers to children living in families with incomes below the federally defined poverty level, affecting their access to resources and opportunities.

Suniya Luthar

A researcher known for her work on the impact of socio-economic status on mental health and resilience among adolescents.