Use the Information for the Question(s)below

question 87

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 amount of the regular yearly dividends in the future is closest to:

• A)$9.00.
• B)$5.00.
• C)$4.50.
• D)$4.00.

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Definitions:

Standardization

Involves establishing uniform procedures, criteria, or specifications within organizations to ensure consistency and efficiency.

Coordinating Mechanism

A system or process used to ensure different parts of an organization work together efficiently towards common goals.

Organizational Design

The process of structuring an organization's roles, responsibilities, and systems to achieve its goals effectively and efficiently.

Direct Supervision

A management style where a supervisor is directly involved in the oversight and direction of employees' work on a day-to-day basis.