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 8% 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 to repurchase shares. The number of shares that Omicron will repurchase is closest to:

Omicron Technologies

The number of shares that Omicron will repurchase is closest to:

1,000,000 shares.

Explanation:

Excess cash = $50 million

Free cash flows in subsequent years = $40 million per year

Dividends payment in most recent year = $40 million

Unlevered cost of capital = 8%

Outstanding common stock = 10 million shares

Dividend per share = $4 ($40,000,000/10,000,000)

Share price = dividend per share/unlevered cost of capital

= $50 ($4/0.08)

Number of shares to repurchase = $50,000,000/$50

= 1,000,000 shares

answer: b) the us is the leading importer but not the leading exporter.

extra info:

the u.s is the largest importer but it is not the largest exporter as china sits on the top of the table when it comes to leading exporters.

but u.s is not far from first,

they rank in 2nd globally as the worlds largest exporter.

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