Use the Information for the Question(s)below

question 28

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 to repurchase shares.The number of shares that Omicron will repurchase is closest to:

• A)1.0 million.
• B)1.2 million.
• C)1.1 million.
• D)0.9 million.

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Definitions:

Herbicides

Chemical substances used to control or kill unwanted plants (weeds).

Transgenic Organisms

Transgenic organisms have had genes from other species inserted into their genetic code, allowing them to express traits that are not naturally theirs.

Plant Cell

The basic structural and functional unit of plants, distinguished by having a cell wall, chloroplasts, and a central vacuole.

Embryos

Early developmental stages of multicellular organisms after fertilization and before birth or hatching.