Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Company ZZZ is an all-equity firm with 10,000,000 shares outstanding. Company ZZZ currently has a cash flow of $2,000,000 USDs and expects future free cash

Company ZZZ is an all-equity firm with 10,000,000 shares outstanding. Company ZZZ currently has a cash flow of $2,000,000 USDs and expects future free cash flows of $22,000,000 per year. Management plans to use the cash to expand the firm's operations, which will in turn increase future cash free cash flows to $40,000,000 per year. If the cost of capital of Company ZZZ's investments is 10%, calculate the stock price if the company decides to use the cash for a share repurchase rather than the expansion. Note: Express your answers in strictly numerical terms. For example, if the answer is $500, write enter 500 as an answer.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance With Monte Carlo

Authors: Ronald W. Shonkwiler

2013th Edition

146148510X, 978-1461485100

More Books

Students also viewed these Finance questions