Palo Alto Enterprises has $300,000 in cash. They wish to invest the money in Treasury bills at 8% 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
In perfect capital markets, which option will shareholders prefer?
A) immediate cash dividend
B) dividend after one year
C) prefer half from each source
D) indifferent between options
Answer: D
You might also like to view...
A bond is usually divided into a number of individual bonds of $500 each
a. True b. False Indicate whether the statement is true or false
Because corporations are chartered either with perpetual life or with provision for renewal if the charter specifies a limit, irrespective of the deaths of any stockholders or disposal of their stock, corporations are said to have the characteristic of
a. limited liability of owners. b. transferable ownership units. c. taxation of corporate earnings. d. unlimited life.
In a(n) ________ economy, the cost to produce and buy products and services escalates as prices increase.
A. inflationary B. depressive C. expansionary D. deflationary E. recessionary
Managerial performance in the domestic setting and ______ is the main selection criterion for foreign assignments.
A. technical competences B. domestic setting C. financial gain D. perceived risk