Use the Information for the Question(s)below

question 98

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.
-Assume that Vezuvo uses the entire $75 million in excess cash to pay a special dividend. The amount of the special dividend is closest to:

• A)$6.00.
• B)$7.00.
• C)$7.50.
• D)$6.50.

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Definitions:

Weighted Average Delay

implies the average time delay in a process or system, adjusted for the importance or frequency of each delay component.

Collection Delay

The time lapse between when a payment is made by a customer and when the funds become available to the recipient company.

Average Amount

The mean sum of a group of numbers, calculated by dividing the total by the quantity of numbers.