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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 special dividend is closest to:
Rounded
The process of adjusting the digits of a number to reduce its precision according to a specific rule, usually to make it simpler or easier to understand.
Median
The middle value of a data set when it is ordered from smallest to largest, or the average of the two middle values when the dataset has an even number of observations.
Outliers
Observations in a dataset that fall far outside the range of values of other observations, potentially skewing the results or analysis.
Central Tendency
A statistical measure that identifies a single value as representative of a data set, commonly the mean, median, or mode.
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