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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 ________.
Demand Curve
A curve that illustrates the demand for a product by showing how each possible price (on the vertical axis) is associated with a specific quantity demanded (on the horizontal axis).
Economic Rent
The price paid for the use of land and other natural resources that are in fixed (perfectly inelastic) supply.
Antipoverty Programs
Governmental or non-profit organization initiatives designed to reduce or eliminate poverty by providing financial assistance, education, or job training.
Productive Capacity
Refers to the maximum output a system, economy, or machine can produce over a period of time under normal conditions.
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