Palo Alto Enterprises Has $100,000 in Cash

question 27

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. Alternatively they can pay a dividend and allow shareholders to make the investment. If corporate tax rates are 35%, 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:

Social Domain Model

A theory in psychology that categorizes moral, social-conventional, and personal reasoning into distinct domains, helping to understand how people differentiate their interactions and judgments in society.

Moral Reasoning

The process by which individuals make decisions about what is right or wrong, ethical or unethical, based on personal, cultural, or societal values.

Cognitive Ability

The capacity to perform various mental activities associated with learning, problem-solving, decision making, and adaptation to new situations.

Empathy

The ability to understand and share the feelings of another, putting oneself in their shoes emotionally.