Use the Information for the Question(s)below

question 27

Essay

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 you own 4000 shares of Omicron stock and that Omicron uses the entire $50 million to pay a special dividend.Suppose you are unhappy with Omicron's decision and would have preferred that Omicron used the excess cash to repurchase stock.Detail exactly how you could undo the dividend in a way that will provide you with the same combination of cash and stock that you would have received if Omicron had not paid the special dividend.

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Definitions:

Operant Conditioning

A learning process through which behavior is shaped by reinforcement or punishment.

Social Learning

is the process of acquiring new behaviors or knowledge through observing and imitating others, as articulated by Albert Bandura.

Classical Conditioning

A learning process in which a neutral stimulus comes to elicit a response after being paired with a stimulus that naturally brings about that response.

Developmental Tests

Assessments used to measure the progress in intellectual, physical, or emotional development at different stages of a child's growth.