Use the Information for the Question(s)below

question 8

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 in excess cash to pay a special dividend.Omicron's cum-dividend price is closest to:

• A)$50.00.
• B)$40.00.
• C)$5.00.
• D)$45.00.

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Definitions:

Fungicide

Chemical substances used to kill or inhibit the growth of fungi and fungal spores, commonly used in agriculture to prevent or control fungal diseases.

Chlorinated Hydrocarbons

A group of chemical compounds that contain chlorine, carbon, and hydrogen, used in industry and agriculture, and known for their persistence in the environment.

Aldrin

A potent insecticide that has been banned in many countries due to its toxic effects on wildlife and potential harm to human health.

Dieldrin

A highly toxic chlorinated hydrocarbon pesticide, banned in many countries due to its environmental persistence and potential to harm wildlife and humans.