Use the Information for the Question(s) Below

question 52

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 bonds 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 bonds
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) $5.00
• C) $4.75
• D) $5.25

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Definitions:

Expected Frequency

The number of times an outcome is expected to occur in a statistical experiment based on the probability of that outcome.

Police Job

Employment in law enforcement, responsible for maintaining public order and safety.

Walk After Dark

An activity that gauges public perception of safety or crime in an area, often related to social studies.

Expected Frequency

The predicted frequency of occurrences in a category based on the application of a statistical model or the distribution assumption.