Use the Information for the Question(s)below

question 79

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 ex-dividend price is closest to:

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

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Definitions:

Reading Disorder

A learning disability characterised by difficulties with accurate or fluent word recognition, poor decoding, and spelling abilities.

Letter Reversals

Common in early childhood, letter reversals refer to the mixing up or flipping of letters while writing, often seen with "b" and "d."

Gross Motor Skill

Skills that involve large muscle groups used in activities such as walking, running, and jumping.

Adolescent Growth Spurt

A rapid increase in height and weight during puberty as the body transitions into adult size and shape.