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:

Illegal Activity

Actions or endeavors that are prohibited by law and subject to criminal penalties.

Unfair Competition

Business conduct deemed unethical or deceptive, infringing on another's business rights or attempting to mislead consumers.

Intimidation

The act of making someone fearful or overawed, especially in order to influence their behavior or decisions.

Intentional Infliction

The deliberate action by one party meant to cause distress or harm to another party.