Luther Industries Has $6 Million in Excess Cash and 1

question 20

Multiple Choice

Luther Industries has $6 million in excess cash and 1.2 million shares outstanding. Luther is considering investing the cash in one-year Treasury bills that are currently paying 6% 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 ________.

• A) $6.36
• B) $5.30
• C) $4.24
• D) $10.60

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Definitions:

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The fundamental sequence of steps involved in transmitting a message from a sender to a receiver, incorporating encoding, medium selection, decoding, and feedback.

Important

Having significant value, meaning, or influence, often affecting the outcome of a situation or the overall quality of something.

Drawbacks

Refers to disadvantages or negative consequences associated with a decision, action, or strategy.

Listening

The active process of receiving, interpreting, and responding to verbal and non-verbal messages, essential for effective communication.