Palo Alto Enterprises Has $100,000 in Cash

question 56

Multiple Choice

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.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

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Definitions:

Returns to Scale

The speed at which production levels rise due to a corresponding rise in all contributing factors.

Labor Hours

The total hours of work put in by workers or employees during a specified period.

Market Costs

Expenses incurred by companies during the production and distribution of goods or services in the marketplace.

Hydraulic Lifts

Mechanical devices that use fluid pressure to raise or lower objects, often used in automotive repairs and construction.