Use the Information for the Question(s)below

question 6

Multiple Choice

Use the information for the question(s) below.
Luther Industries has $5 million in excess cash and 1 million shares outstanding.Luther is considering investing the cash in one-year treasury bills that are currently paying 5% interest,and then using the cash to pay a dividend next year.Alternatively,Luther can pay the cash out as a dividend immediately and the shareholders can invest in the treasury bills themselves.Assume that capital markets are perfect.
-If Luther decides to pay the dividend immediately the dividend per share will be closest to:

• A)$1.05.
• B)$5.25.
• C)$5.00.
• D)$4.75.