Use the Information for the Question(s)below

question 90

Multiple Choice

Use the information for the question(s) below.
Omicron Technologies has $50 million in excess cash and no debt.The firm expects to generate additional free cash flows of $40 million per year in subsequent years and will pay out these future free cash flows as regular dividends.Omicron's unlevered cost of capital is 10% and there are 10 million shares outstanding.Omicron's board is meeting to decide whether to pay out its $50 million in excess cash as a special dividend or to use it to repurchase shares of the firm's stock.
-Assume that Omicron uses the entire $50 million in excess cash to pay a special dividend.The amount of the special dividend is closest to:

• A)$5.00.
• B)$9.00.
• C)$4.00.
• D)$4.50.

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Definitions:

Human Resource Scan

An analysis tool used to evaluate the current competencies, skills, and productivity of an organization's workforce.

Environment Scan

The process of collecting and analyzing information about the internal and external environment to identify opportunities and threats.

Best-Cost Provider

A strategy where a company aims to offer products or services that are of high quality and relatively low cost to attain a competitive advantage.

Porter's

Porter's frameworks involve strategic tools created by Michael Porter, such as the Five Forces analysis and the Value Chain, used for assessing the competitive environment and organizational capabilities.