Use the Information for the Question(s)below

question 56

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.
-Omicron's enterprise value is closest to:

• A)$500 million.
• B)$900 million.
• C)$450 million.
• D)$400 million.

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Definitions:

Peer Conformity

The tendency to adopt the behaviors, attitudes, or values of one's peer group in order to fit in or be accepted.

Peer Pressure

The influence exerted by a peer group, encouraging individuals to change their attitudes, values, or behaviors to conform to group norms.

Nonconformists

Individuals who reject or do not adhere to the norms, values, or practices of the majority society or group.

Identity Foreclosures

A state in developmental psychology where an individual prematurely commits to an identity without adequately exploring alternatives.