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 11% 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. Omicron's cum - dividend price is closest to: A. $ 50 B. $83 C. $ 41 D.$33
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 11% 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. Omicron's cum - dividend price is closest to: A. $ 50 B. $83 C. $ 41 D.$33
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 13P
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Omicron Technologies has $50 million in excess cash and no debt. The firm expects to generate additional
A. $ 50
B. $83
C. $ 41
D.$33
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