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Suppose GoodBuy must pay corporate taxes at a 30% rate on the interest it will earn from the one-year Treasury bill paying 1.85% interest. Would
Suppose GoodBuy must pay corporate taxes at a 30% rate on the interest it will earn from the one-year Treasury bill paying 1.85% interest. Would pension fund investors (who do not pay taxes on their investment income) prefer that GoodBuy use its excess cash to pay the $375,000 dividend immediately or retain the cash for one year? What would be the amount that the pension fund will receive in each case?
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