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]

 

Answer rating: 100% (QA)

1 To calculate the firm s share price after using 69 million of its cash to repurchase shares at the market price of 72 you can use the following form View the full answer