ABC is an all-equity firm with 100 million shares outstanding. ABC has $ 100 million in cash and expects future free cas

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Abc Is An All Equity Firm With 100 Million Shares Outstanding Abc Has 100 Million In Cash And Expects Future Free Cas 1 (187.61 KiB) Viewed 26 times

ABC is an all-equity firm with 100 million shares outstanding. ABC has $ 100 million in cash and expects future free cash flows of $50 million per year forever. Management plans to use the cash to expand the firm's operations, which will in turn increase future free cash flows to $60 million per year that will last forever. If the cost of capital of ABC's investments is 10% answer the following questions If ABC decides to expand, what will be the market value of the company (per share)? A. $7.00 B. $5.00 C. $1.00 OD. $6.00 What will be the value of the company if ABC chooses not to expand ? A. $500 million B. $100 million C. $600 million OD. $700 million Is ABC better off expanding operations? A. No B. Yes оооо C. The company is indifferent to expansion OD. not enough information