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Gavrilovic is an all-equity firm with 100 million shares outstanding. Gavrilovic has $221 million in cash and expects future free cash flows of $58 million
Gavrilovic is an all-equity firm with 100 million shares outstanding. Gavrilovic has $221 million in cash and expects future free cash flows of $58 million per year. Management plans to use the cash to expand the firm's operations, which will in turn increase future free cash flows to $68 million per year. If the cost of capital of Gavrilovic's investments is 13%, by how much would a decision to pay out the cash to the investors, rather than use it for the expansion, change the the per/share value held by investors? (Please use the absolute value of the change and round to two decimal places)
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