Palo Alto Enterprises Has $300,000 in Cash

question 53

Multiple Choice

Palo Alto Enterprises has $300,000 in cash.They wish to invest the money in Treasury bills at 8% and use the returns to pay dividends to shareholders after a year.Alternately they can pay a dividend and allow shareholders to make the investment.In perfect capital markets,which option will shareholders prefer?

• A)immediate cash dividend
• B)dividend after one year
• C)prefer half from each source
• D)indifferent between options

Calculate the cash payback period and its relevance in evaluating investment opportunities.

Determine the best payback period among multiple investment options.

Calculate and interpret the expected average rate of return for investments.

Use present value indexing to rank investment proposals with different investment amounts.

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Definitions:

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The obligation of an individual or organization to account for its activities, accept responsibility for them, and disclose the results in a transparent manner.