Question
Keurig Green Mountain (KGM), a specialty coffee and coffeemaker company, makes a surprise announcement today that Green Mountain coffee will be sold in Starbucks retail
Keurig Green Mountain (KGM), a specialty coffee and coffeemaker company, makes a surprise announcement today that Green Mountain coffee will be sold in Starbucks retail stores.This will result in an additional $150 million in free cash flow for KGM, starting in one year, growing at 2% per year thereafter indefinitely.There are no other changes to the firm.KGM has 137 million shares outstanding and a WACC of 13.0%.Net debt for KGM is $700 million.Which of these is the most likely Keurig stock price reaction when they made this announcement?
a.No impact
b.Increased $2
c.Increased $7
d.Increased $10
e.Increased $14
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