Question
1. Suppose there is an all-equity firm with 18 million shares that is currently sitting on $106 million in cash. What will be the firm's
1. Suppose there is an all-equity firm with 18 million shares that is currently sitting on $106 million in cash. What will be the firm's share price if it uses $69 million of its cash to repurchase shares at the market price of $72? [Express your answer in dollars]
2. LaCroix is an all-equity firm that is currently sitting on $126 million in cash. With its current assets in place, the firm is expecting to generate $50 million in free cash flows per year indefinitely, where the first $50 million will occur one year from now. However, the managers are considering a potential investment that would cost $60 million today and increase the firm's future cash flows from $50 million to $55 million per year. Suppose the firm's cost of capital is 10% and that the company has 10 million shares. What will be the firm's share price if it uses some of its cash to fund the investment? [Express your answer in dollars out to two decimal places]
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1 To calculate the firms share price after using 69 million of its cash to repurchase shares at the market price of 72 you can use the following formu...Get Instant Access with AI-Powered Solutions
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