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:

Product B

A term typically used in economics or marketing to refer to a specific item or service offered by a company, distinguished by its characteristics or its positioning.

Advertising

The activity or profession of producing advertisements for commercial products or services.

Regular Hourly Rate

The fixed amount of money that an employee is paid for each hour of work.

Overtime

Working hours that exceed the standard work hours defined by labor laws or agreements.