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:

Number of Workers

The total count of individuals currently employed or available for employment in a specific labor market.

Daily Output

The total quantity of goods or services produced by a firm or an economy in a single day.

Bouquets

Arrangements of flowers that are typically presented as gifts or used for decoration.

Florist

A professional specializing in the art and trade of arranging, selling, and often growing flowers and ornamental plants.