Use the Information for the Question(s)below

question 73

Multiple Choice

Use the information for the question(s) below.
Vezuvo Technologies has $75 million in excess cash and no debt. The firm expects to generate additional free cash flows of $50 million per year in subsequent years and will pay out these future free cash flows as regular dividends. Vezuvo's unlevered cost of capital is 10% and there are 10 million shares outstanding. Vezuvo's board is meeting to decide whether to pay out its $75 million in excess cash as a special dividend or to use it to repurchase the firm's shares.
-Vezuvo's enterprise value is closest to:

• A)$500 million.
• B)$450 million.
• C)$400 million.
• D)$600 million.

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Definitions:

Income Distributions

Payments, often periodic, received by investors from assets they own, such as dividends from stocks or interest from bonds.

Rate of Return

The increase or decrease in the value of an investment during a set period, represented as a proportion of the investment's original price.

Income Distributions

Payments made to investors from the earnings derived from the investments within a fund, such as dividends or interest payments.