Rearden Metal Has No Debt,and Maintains a Policy of Holding

question 61

Multiple Choice

Rearden Metal has no debt,and maintains a policy of holding $50 million in excess cash reserves,invested in risk free treasury securities currently yielding 4%.If Rearden is in the 40% marginal tax bracket,the cost of permanently maintaining this $50 million reserve is closest to:

• A)$0.8 million
• B)$1.2 million
• C)$20.0 million
• D)$30.0 million

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Definitions:

Withdrawal

A psychological or physical retreat from a situation, relationship, or obligation.

Progression

Refers to the act of moving forward or advancing towards a more developed state or stage.

Stimulating Performance

The process of encouraging or motivating employees to improve their work output or to perform at a higher standard.

Job Descriptive Index

A survey instrument that measures employees' job satisfaction with various aspects of their job, including the work itself, supervision, pay, co-workers, and opportunities for promotion.