Firm A is all equity with 100M shares outstanding. The firm

Firm A is all equity with 100M shares outstanding. The firm has $150M in cash and expects futurefree cash flows of $65M/year. The management plans to use the cash available to expand thefirm’s operations. The expansion will increase future free cash flows by12%. Assume that theappropriate annual discount rate for the firm is 10%. 1. Compute the current share price of Firm A. (1 mark) 2. Compute the share price of Firm A if the company decides to use the cash available for ashare repurchase at no premium. Show your answer. (2 marks) 3. Compute the share price of Firm A if the company decides to expand its operations. (2 marks) 4. Comment on the results obtained in parts (2) and (3). (2 marks) 5. Firm A believes that its shares are underpriced and that the true value is $10. Themanagement expects that new information will come out soon and investors will revise theiropinions and agree on a $10 share value for Firm A. If Firm A plans to use the $150M cashfor a share repurchase, should it wait until the new information comes out or not? Showyour answer. (3 marks)