In 2006,Luther Incorporated Paid a Special Dividend of $5 Per

question 88

Multiple Choice

In 2006,Luther Incorporated paid a special dividend of $5 per share for the 100 million shares outstanding.If Luther has instead retained that cash permanently and invested it into treasury bills earning 5%,then the present value of the additional taxes paid by Luther would be closest to:

• A)$35 million
• B)$290 million
• C)$175 million
• D)$585 million

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Definitions:

Opportunity Cost

The cost of the next best alternative foregone when making a decision.

Production Possibilities Frontier

A graph that shows the combinations of two goods that an economy can produce using all available resources and technology efficiently.

Constant

A value or factor that does not change in mathematical expressions or experiments, representing stability within a specified context.

Efficient

Describes a system or process that achieves its objectives with minimal waste of time or resources.