Hunter Industries has generated $1 million in excess of its investment needs. The firm can invest the excess cash in Treasury bonds at 8 percent or distribute the cash to shareholders as a dividend. Assume that the corporate tax rate is 40 percent and that the firm is owned by three different kinds of taxpayers: The first type is tax-exempt, the second type has a 25 percent marginal tax rate, and the third type has a 40 percent marginal tax rate.

Describe the decision preferred by the three different investors, indicating the reasons for the decision and providing calculations to show your conclusions.