Use the Information for the Question(s)below

question 25

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.
-Including its cash,Omicron's total market value is closest to:

• A)$500 million.
• B)$900 million.
• C)$400 million.
• D)$450 million.

---

Definitions:

Drawer

In banking, the person who writes or creates a check. In the context of furniture, it is a sliding storage compartment.

Universal Defense

A defense that is valid against all holders of a negotiable instrument, including holders in due course (HDCs) and holders with the rights of HDCs. Universal defenses are also called real defenses.

Personal Defense

Legal defenses that a defendant may use in a court of law to challenge the validity of a claim based on personal circumstances or conditions.

Agency Status

The condition of being an agent who is legally authorized to act on behalf of another person or entity, often subjected to specific responsibilities and liabilities.