Clovix Corporation has $60.32 million in cash, 10.4 million shares outstanding, and a current share price of $33 . Clovix is deciding whether to use the 60.32 million to pay an immediate special dividend of $5.80 per share, or to retain and invest it at the risk-free rate of 10% and use the $6.03 million in interest earned to increase its regular annual dividend of per share. Assume perfect capital markets.

a. Suppose Clovix pays the special dividend. How can a shareholder who would prefer an increase in the regular dividend create it on her own?

b. Suppose Clovix increases its regular dividend. How can a shareholder who would prefer the special dividend create it on her own?

Suppose Clovix pays the special dividend. How can a shareholder who would prefer an increase in the regular dividend create it on her own?(Select the best choice below.)

A.Sell a share of Clovix stock for $33 today and invest the proceeds to earn $3.30 in interest.

B.Borrow $33 today and use it to buy a share of Clovix stock.

C.Borrow $5.80 today and use the increase in the regular dividend to pay the interest of$0.58 per year on the loan.

D.Invest the $5.80 special dividend and earn interest of $0.58 per year.

Part 2

b. Suppose Clovix increases its regular dividend. How can a shareholder who would prefer the special dividend create it on her own?(Select the best choice below.)

A.Invest the $5.80 special dividend and earn interest of $0.58 per year.

B.Borrow $5.80 today and use the increase in the regular dividend to pay the interest of $0.58 per year on the loan.

C.Sell a share of Clovix stock for $33 today and invest the proceeds to earn $3.30 in interest.

D.Borrow $33 today and use it to buy a share of Clovix stock.