Use the Information for the Question(s)below

question 56

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.
-Omicron's enterprise value is closest to:

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

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Definitions:

Positive Assumptions

The concept of maintaining an optimistic outlook and expecting good outcomes, often leading to positive behavior and attitudes towards life and challenges.

Negative Assumptions

Cognitive biases or beliefs that lead an individual to view situations or outcomes more pessimistically, potentially contributing to anxiety and depression.

Cognitive Dissonance

The unease experienced mentally by an individual who possesses two or more contradictory beliefs, ideas, or values at the same time.

Smoker

An individual who inhales the smoke of burning tobacco products, such as cigarettes or cigars.