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:

Otoliths

Small crystals in the inner ear that contribute to the sense of balance by detecting movement and gravity.

Cochlear Nerve

A nerve that transmits sound information from the cochlea in the inner ear to the brain.

Tympanic Membrane

Also known as the eardrum, it is a thin membrane that separates the outer ear from the middle ear and vibrates in response to sound waves.

Oval Window

A membrane-covered opening that leads from the middle ear to the inner ear, transmitting sound vibrations to the cochlea.