Palomino Enterprises has $200 000 in cash. They wish to invest the money in Treasury bonds at 5% and use the returns to pay dividends to shareholders after a year. Alternately, they can pay a dividend and allow shareholders to make the investment. In perfect capital markets, which option will shareholders prefer?

Select one:

a.

prefer half from each source

b.

immediate cash dividend

c.

indifferent between options

d.

dividend after one year