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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 invests the excess cash in Treasury bills,then the dividend per share next year will be closest to:
Effective Collusion
A situation where firms in a market agree to act together instead of competing, often to fix prices or market shares, to maximize their profits.
Marginal Revenue
The additional income gained from selling one more unit of a product or service, crucial in determining the optimal level of output for a company.
Marginal Cost
The extra expense associated with manufacturing an additional unit of a product or service.
Oligopolistic Firm
A company operating in an oligopoly market structure, characterized by a few firms dominating the market, leading to specific behaviors like pricing collusion or competition.
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