Use the cash for the expansion

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Reference no: EM13731471

Rexton Oil is an all-equity firm with 100M shares outstanding. Rexton has $150M in cash and expects future free cash flows of $65M 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 $72.8M per year. If the cost of capital of Rexton's investments is 10%.

What would be the price of the stock if Rexton Oil would use the cash for the expansion?

Reference no: EM13731471

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Use the cash for the expansion : Rexton Oil is an all-equity firm with 100M shares outstanding. Rexton has $150M in cash and expects future free cash flows of $65M per year. Management plans to use the cash to expand the firm's operations, which will in turn increase future cash fre..

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