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A Inc is unleveraged, has $300 million in cash and expects future FCF of $150 million per year. As management is considering a new investment
A Inc is unleveraged, has $300 million in cash and expects future FCF of $150 million per year. As management is considering a new investment opportunity: at a cost of $300 million it would increase future FCF to $165 million per year. Alternatively, A could use the $300 million to repurchase some of its 250 million outstanding shares. If the cost of capital of As investments is 7%, what would A's shareholders prefer?
A.Invest
B. Share repurchase
C. Indifferent between the two
D.Need more information
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