How much money will shareholders have after three years

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Reference no: EM131917935

The Everwood ditch-digging firm has $2,000 of extra cash. George, the CFO, is thinking about what to do with the money. He can put it into treasuries for three years currently yielding 6% or pay it out to shareholders now. Of course, shareholders themselves also have access to the treasury market. Most of the equity investors in Everwood ditch-digging are poor and pay only a 15% personal tax rate. The maximum tax rate on dividends is 18%. The corporate tax rate is 32%. How much money will shareholders have after 3 years under each of George's alternatives and what should he do?

Reference no: EM131917935

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