Use the Information for the Question(s)below

question 3

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 regular yearly dividends in the future is closest to:

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

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Definitions:

Industrial Lathe Sales

The commercial activity surrounding the buying and selling of industrial lathes, which are machines used to shape metal, wood, or other materials.

First-Order Autoregressive Model

A time series model where the current value is based on a linear combination of the previous value and a stochastic error term.

Nonautocorrelated Random Error

Errors in a dataset that occur randomly and are not correlated with each other, indicating no predictable pattern in the fluctuations.

Autoregressive Model

An Autoregressive Model is a statistical model for analyzing and forecasting time series data, where future values are assumed to be a linear function of past values.