Prada Has Nine Million Shares Outstanding, Generates Free Cash Flows

question 5

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 stock or invest the cash in a project that generates free cash flows of $5 million each year. Should Prada invest or repurchase the shares?

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

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Definitions:

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An idea in the field of educational psychology that defines the gap between a learner's ability to perform a task on their own and their capability to accomplish more advanced tasks with the assistance and support of a more experienced individual.

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