United 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. United’s unlevered cost of capital is 10% and there are 10 million shares outstanding. United'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.
i. What are United’s enterprise and total market values?
ii. Assume that United uses the entire £50 million in excess cash to pay a special dividend. What will be the amount of the regular yearly dividends in the future?
iii. Assume that United uses the entire £50 million in excess cash to pay a special dividend. What is United's ex-dividend price?
iv. Assume that United uses the entire £50 million to repurchase shares.
What will be the amount of the regular yearly dividends in the future?
Please write all the steps in detail,