Use the Information for the Question(s)below

question 15

Multiple Choice

Use the information for the question(s) below.
Luther Industries has $5 million in excess cash and one million shares outstanding. Luther is considering investing the cash in one-year Treasury bonds 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 bonds themselves. Assume that capital markets are perfect.
-If Luther decides to pay the dividend immediately, the dividend per share will be closest to:

• A)$5.25.
• B)$1.05.
• C)$4.75.
• D)$5.00.

---

Definitions:

Photograph Cover

The front image or picture on a magazine, book, or album designed to represent its contents or appeal to consumers.

Chi-square Statistic

A statistic that measures the difference between observed frequencies in a sample and the frequencies that would be expected by chance.

Null Hypothesis

A statement that there is no effect or no difference, and it is the statement being tested in statistical hypothesis testing.

Economic Concerns

Issues related to the health and functioning of an economy, including inflation, unemployment, and GDP growth.