Use the information for the question(s) below.

Consider the following tax rates:

Year	Corporate Tax Rate	Capital Gains Rate	Ordinary Income Rate	Dividend Rate
1997-2000	35%	20%	40%	40%
2001-2002	35%	20%	39%	39%
2003-	35%	15%	35%	15%

The current tax rates are set to expire in 2008 unless Congress extends them. The tax rates shown are for financial assets held for one year. For assets held less than one year, capital gains are taxed at the ordinary income tax rate (currently 35% for the highest bracket); the same is true for dividends if the assets are held for less than 61 days.

9) In 2006, Luther Industries paid a special dividend of $5 per share for the 100 million shares outstanding. If Luther had instead retained that cash permanently and invested it into Treasury Bills earning 6%, then the present value of the additional taxes paid by Luther would be closest to:

A) $35 million

B) $290 million

C) $175 million

D) $585 million

Answer: Explanation:

10) The effective tax disadvantage for retaining cash in 2006 is closest to:

A) 14.75%

B) 12.50%

C) 35.00%

D) 15.00%

Answer: Explanation:

11) The effective tax disadvantage for retaining cash in 2002 is closest to:

A) 15.00%

B) 14.75%

C) 30.00%

D) 35.00%

Answer: Explanation:

12) The effective tax disadvantage for retaining cash in 2,000 is closest to:

A) 15.00%

B) 13.35%

C) 14.75%

D) 35.00%

Answer: Explanation: