Omicron Technologies Has $50 Million in Excess Cash and No

question 76

Multiple Choice

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 8% 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 regular yearly dividends in the future is closest to ________.

• A) $3.20
• B) $4.80
• C) $4.00
• D) $8.00

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Definitions:

Prosocial Behavior

Actions intended to benefit others, including behaviors like helping, sharing, and comforting.

Immanent Justice

A child's belief that the world is just, meaning that people get what they deserve because of a universal force or morality that ensures fairness.

Social Justice Theory

encompasses theories that aim at creating a society based on principles of equality and solidarity, understanding and valuing human rights, and recognizing the dignity of every person.

Moral Reasoning

The process through which individuals make decisions about right and wrong, guided by ethical principles and personal values.