Shares outstanding-generates free cash flows

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Prada has ten million shares outstanding, generates free cash flows of $ 60 million each year and has a cost of capital of 10%. It also has $40 million of cash on hand. Prada wants to decide whether to repurchase stock or invest the cash in a project that generates free cash flows of $2 million each year. Should Prada invest or repurchase the shares?

A) repurchase

B) invest

C) indifferent between options

D) cannot say for sure

Reference no: EM13806687

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