Assume that Omicron uses the entire $50 million to repurchase shares.The amount of the regular yearly dividends in the future is closest to:

Question

Quizplus · Accepted Answer

If Omicron uses the entire $50 million to repurchase shares, the number of shares outstanding will decrease by $\frac{50,000,000}{20} = 2,500,000$ shares. Thus, the new dividend per share will be $\frac{17,500,000}{2,500,000} = 7$. Since Omicron has historically increased their dividend by $10\%$ each year, we can estimate the future regular yearly dividend will be approximately $7(1.1) \approx \boxed{	extbf{(C)}\$4.50}$.

Assume That Omicron Uses the Entire $50 Million to Repurchase