Your firm is all$-$equity with $1$ million shares outstanding. The firm currently has $$80$ million

in cash and expects future free cash flows of $$18$ million per year. Management is deciding

whether to use the cash to either expand the firm's operations, which will in turn increase future

free cash flows to $$25$ million per year, or to pay out the cash in a share repurchase. If the cost

of capital of the firm's investments is $10\%,$ which option would be preferred by shareholders?

A$)$ Shareholders would prefer the repurchase since the share price will be $$7$ higher.

B$)$ Shareholders would prefer the expansion since the share price will be $$10$ higher.

C$)$ Shareholders would prefer the expansion since the share price will be $$7$ higher.

D$)$ Shareholders would prefer the repurchase since the share price will be $$10$ higher.

E$)$ Shareholders would be indifferent between the two options.