Use the Information for the Question(s)below

question 28

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 to repurchase shares.The number of shares that Omicron will repurchase is closest to:

• A)1.0 million.
• B)1.2 million.
• C)1.1 million.
• D)0.9 million.

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Definitions:

Receptor Interaction

The binding and subsequent response triggered by the engagement of a receptor molecule with its specific ligand, crucial in various biological processes.

Second Messenger

Intracellular signaling molecules released by the cell in response to exposure to extracellular signaling molecules.

Intercellular Signals

Chemical or physical messages passed between cells to coordinate their activities and functions within an organism.

Coordinate Growth

The process by which various parts of an organism grow at rates that maintain the overall shape and proportion of the organism.