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AMS Company has unexpectedly generated a​ one-time extra ​$5 million in cash flow this year. After...

AMS Company has unexpectedly generated a​ one-time extra ​$5 million in cash flow this year. After announcing the extra cash​flow, AMS stock price was ​$55 per share​ (it has 1 million shares​outstanding). The managers are considering spending the ​$5 million on a project that would generate a single cash flow of ​$5.5 million in one​ year, which they would then use to repurchase shares. Assume the cost of capital for the project is 12​%.

a. If they decide on the​ investment, the price per share will be ​$ . ​(Round to the nearest​ cent.)

b. If they instead use the ​$5 million to repurchase stock​ immediately, the price per share will be ​$ . ​(Round to the nearest​ cent.)

c.​ Clearly, is the better decision because the share price will be higher.

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