Use the Information for the Question(s)below

question 3

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.The amount of the regular yearly dividends in the future is closest to:

• A)$4.50.
• B)$5.00.
• C)$4.00.
• D)$9.00.

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Definitions:

Standard Deviation

A measure of the dispersion or spread in a set of data; it shows how much variation there is from the average.

Government Agency

An organization at the national, state, or local level that administers specific functions or services to the public.

Central Tendency

A statistical measure that identifies the center or typical value of a dataset, including mean, median, and mode.

Standard Deviations

A statistical metric that quantifies the variability or spread of a dataset relative to its mean, used in various fields to assess variation.