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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:
Factor 2
A component or element that contributes to a particular result or situation.
Profit
The financial gain obtained when the amount earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.
Marginal Product
Marginal product is the additional output resulting from the use of one more unit of a variable input, holding other inputs constant.
Fertilizer
Substances used to supply essential nutrients to plants, aiming to enhance growth, yields, and quality of agricultural produce.
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