Use the Information for the Question(s)below

question 8

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.Omicron's cum-dividend price is closest to:

• A)$50.00.
• B)$40.00.
• C)$5.00.
• D)$45.00.

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Definitions:

Family Decisions

Decisions made by family members that affect the household, often involving financial, educational, and lifestyle choices.

Permissive Parents

Parenting style characterized by low demands with high responsiveness, where parents tend to be very loving, yet provide few guidelines and rules.

Neglectful Parents

Parents who fail to provide adequate care, support, and attention to their children.

Self-Efficacy

A person's confidence in their ability to perform actions that lead to desired outcomes.