Omicron Technologies has $50 million in excess cash and no debt. The firm expects to generate...

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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. A) Assume that Omicron uses the entire $50 million in excess cash to pay a special dividend. The amount of the special dividend is closest to? B) 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? C) Assume that Omicron uses the entire $50 million to repurchase shares. The number of shares that Omicron will repurchase is closest to? 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. A) Assume that Omicron uses the entire $50 million in excess cash to pay a special dividend. The amount of the special dividend is closest to? B) 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? C) Assume that Omicron uses the entire $50 million to repurchase shares. The number of shares that Omicron will repurchase is closest to?

Answer rating: 100% (QA)

A Ass ume that O mic ron uses the entire 50 million in excess cash to pay a special dividend The amo... View the full answer