Use the Information for the Question(s)below

question 57

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. Vezuvo's cum-dividend price is closest to:

• A)$55.00.
• B)$57.50.
• C)$40.00.
• D)$47.50.

Appreciate the evolving landscape of securities marketing, including the role of the internet and the SEC's stance on online offerings.

Understand the differences between mergers, consolidations, and asset purchases.

Recognize the legal processes involved in mergers, consolidations, asset purchases, and dissolutions.

Identify the rights and obligations of target and acquiring corporations in mergers and acquisitions.

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Definitions:

Capital Balances

The amount of money that the owners of a business have invested in it, typically represented in the equity section of the balance sheet.

Income and Losses

Represents the financial results of a company's operations, with income meaning the revenues exceeding expenses and losses referring to expenses exceeding revenues.

Capital Interest

The share of ownership in a company or its assets, particularly reflecting the amount invested by owners or shareholders.

Capital Balances

The amounts recorded in the equity section of a company's balance sheet or partnership's accounts, representing the owners' stakes.