2. AMC Corporation currently expects to generate $40 million free cash flows each year forever, and it currently has $100 million cash. Its cost of capital is 10%. The firm has 10 million shares outstanding and no debt. Suppose AMC uses its excess cash to repurchase shares. After the share repurchase, news will come out that will change AMC's free cash flow each year will be either $60 million or $20 million. What is AMC's share price prior to the share repurchase? a. b. What is AMC's share price after the repurchase if its firm value goes up? What is AMC's share price after the repurchase if its firm value declines? C. Suppose AMC waits until after the news comes out to do the share repurchase. What is AMC's share price after the repurchase if its firm value goes up? What is AMC's share price after the repurchase if its firm value declines? 1 d. Suppose AMC management expects good news to come out. Based on your answers to parts b and c, if management desires to maximize AMC's long term share price, will they undertake the repurchase before or after the news comes out? When would management undertake the repurchase if they expect bad news to come out? e. Given your answer to part d, what effect would you expect an announcement of a share repurchase to have on the stock price? Why