Palo Alto Enterprises has $100,000 in cash. They wish to invest the money in Treasury bills at 6% and use the returns to pay dividends to shareholders after a year. Alternatively they can pay a dividend and allow shareholders to make the investment
If corporate tax rates are 35%, which option will shareholders prefer?
A) immediate cash dividend
B) dividend after one year
C) prefer half from each source
D) indifferent between options
Answer: A
Business
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Sadik Inc.'s bonds currently sell for $1,280 and have a par value of $1,000. They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,050. What is their yield to call (YTC)?
A) 6.39% B) 6.72% C) 7.08% D) 7.45% E) 7.82%
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________ systematically examines corner points, using algebraic steps, until an optimal solution is found
A) The graphical approach B) The simplex method C) Karmarkar's method D) Trial-and-error E) none of the above
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