You manage a $($tax$-$free$)$ pension fund that is invested in KOA Corporation. KOA's managers have just announced that they unexpectedly

generated an extra $$50$ million in cash flow this year. They are considering paying it out now as a special dividend or investing it in one$-$year

Treasury securities that will earn $1\mathrm{.}0\%$ interest over the next year. They would then distribute the $$50$ million plus interest earned as a special

dividend. If KOA pays a $25\%$ corporate tax rate, would you prefer they pay the $$50$ million as a special dividend now or wait a year?

If KOA pays the special dividend immediately, you can then choose to invest in the same one$-$year Treasury securities and earn $ million.

$($Round to two decimal places.$)$

If KOA invests in the one$-$year Treasury securities$,$ they will have to pay taxes and so will only be able to pay out $ million. $($Round to two

decimal places.$)$

Thus, you would prefer they pay the $$50$ million as a special dividend

$.($Select from the drop$-$down menu.$)$