A company decides to invest $250 million cash in one-year government bills yield

Question

A company decides to invest $250 million cash in one-year government bills yielding 4% and use the proceeds from the sale of the bills to pay a higher dividend next year. What would be the company's share price? Compare the share price with the deferred dividend to the share price when the $250 million is immediately paid out in dividends. What can you conclude? A company decides to invest $250 million cash in one-year government bills yielding 4% and use the proceeds from the sale of the bills to pay a higher dividend next year. What would be the company's share price? Compare the share price with the deferred dividend to the share price when the $250 million is immediately paid out in dividends. What can you conclude? A company decides to invest $250 million cash in one-year government bills yielding 4% and use the proceeds from the sale of the bills to pay a higher dividend next year. What would be the company's share price? Compare the share price with the deferred dividend to the share price when the $250 million is immediately paid out in dividends. What can you conclude?

Explanation / Answer

Answer: Share Price=$250/0.04

=$6250

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