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.

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Definitions:

Quantifier-Negation Rule

A principle in formal logic that deals with the relationship between quantifiers and the negation of statements.

Quantifier

A symbol or word in logic that specifies the quantity of specimens in the domain of discourse that satisfy an open formula.

Negation

The contradiction or denial of something, or the operation of inverting the truth value in logic.

UI

An abbreviation often standing for "User Interface," which refers to the means by which a user interacts with a computer, website, or application.