Use the Information for the Question(s)below

question 64

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 invests the excess cash in Treasury bonds, then the dividend per share next year will be closest to:

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

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Definitions:

Drones

Unmanned aerial vehicles (UAVs) capable of flying autonomously or being controlled remotely, used for various purposes including photography, surveillance, and delivery.

Average Variable Costs

The sum of all costs that change with production volume, divided by the number of units produced.

Drones

Unmanned aerial vehicles (UAVs) controlled by remote pilots or autonomously by onboard computers, used for various purposes including surveillance, delivery, and photography.

Average Variable Costs

Costs that vary with the level of output produced, divided by the quantity of output produced.