Assume that you own 2500 shares of Omicron stock and that Omicron uses the entire $50 million to repurchase shares.Suppose you are unhappy with Omicron's decision and would prefer that Omicron used the excess cash to pay a special dividend.The number of shares that you would have to sell in order to receive the same amount of cash as if Omicron paid the special dividend is closest to:
A)275
B)310
C)125
D)250

Question

Quizplus · Accepted Answer

A)Enterprise Value - PV(Future FCF)= 11ea7cce_3cbb_d05a_928c_eb5a930061bb_TB1626_11 = $400 million
Market value = Enterprise Value + cash = $400 + $50 = $450 million
Share price = 11ea7cce_3cbb_d05b_928c_3577bbe1fe52_TB1626_11 = 11ea7cce_3cbb_f76c_928c_edcc1fcda018_TB1626_11 = $45.00
Dividends that you wanted to receive = 2500 shares × $5 share = $12,500
Number of shares to sell = 11ea7cce_3cbc_1e7d_928c_999d855f0c39_TB1626_11 = 277.78 shares

Assume That You Own 2500 Shares of Omicron Stock and That