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:

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Sigmund Freud

Sigmund Freud was an Austrian neurologist and the founder of psychoanalysis, a clinical method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Instincts

Innate, fixed patterns of behavior in animals and humans that are responses to specific stimuli.

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Aggressive behavior among school-aged children and teenagers that involves a real or perceived power imbalance, including actions like making threats, spreading rumors, attacking someone physically or verbally, and excluding someone from a group.