Consider the following tax rates: In 2006, Luther Incorporated paid a special dividend of $7 per share for the 120 million shares outstanding. If Luther has instead retained that cash permanently and invested it into Treasury bills earning 5%, then the present value (PV) of the additional taxes paid by Luther would be closest to ________.

Question

Consider the following tax rates:  In 2006, Luther Incorporated paid a special dividend of $7 per share for the 120 million shares outstanding. If Luther has instead retained that cash permanently and invested it into Treasury bills earning 5%, then the present value (PV) of the additional taxes paid by Luther would be closest to ________.

Quizplus · Accepted Answer

C) PV = 11ea84dc_f503_313b_9a63_cd8d4643cca7_TB1316_11_TB1316_11 = $7 × 120 million shares × 0.35 = $294.00 million

Consider the Following Tax Rates: in 2006, Luther Incorporated