1. Rexton Oil is an all-equity firm with 20 million of shares outstanding. Rexton currently has a cash flow of $100 Million of USDs and expects future free cash flows of $100 Millions 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 $500 Millions per year. If the cost of capital of Rexton's investments is 8%, calculate the stock price for the company if the expansion where to happen. 2. Rexton Oil is an all-equity firm with 20 million of shares outstanding. Rexton currently has a cash flow of $100 Million of USDs and expects future free cash flows of $100 Millions 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 $500 Millions per year. If the cost of capital of Rexton's investments is 8%, calculate the stock price if the company decides to use the cash for a share repurchase rather than the expansion.
1. Rexton Oil is an all-equity firm with 20 million of shares outstanding. Rexton currently has a cash flow of $100 Million of USDs and expects future free cash flows of $100 Millions per year. Management plans to use the cash to expand the firm's operations, which will in turn increase future
2. Rexton Oil is an all-equity firm with 20 million of shares outstanding. Rexton currently has a cash flow of $100 Million of USDs and expects future free cash flows of $100 Millions 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 $500 Millions per year. If the cost of capital of Rexton's investments is 8%, calculate the stock price if the company decides to use the cash for a share repurchase rather than the expansion.
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