Morgan Industries is an all-equity firm with 50 million shares outstanding. Iota has $200 million in cash and expects future free cash flows of $75 million per year. Management plans to use the cash to expand the firm's operations, which in turn will increase future free cash flows by 12%. Morgan's cost of capital is 10% and assume that capital markets are perfect. • What is the value of Morgan Industries if they use the $200 million to expand? • What is the price per share of Morgan Industries if they use the $200 million to expand?
Morgan Industries is an all-equity firm with 50 million shares outstanding. Iota has $200 million in cash and expects future
• What is the value of Morgan Industries if they use the $200 million to expand?
• What is the price per share of Morgan Industries if they use the $200 million to expand?
Free cash flows are those amount of cash in business which can be used freely without any restrictions in business. This is used for calculating value of the company.
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