.11 Simple 12:56 AM 17%). a mathxl.com FINA3120 Fall 2017 Winifred Afrane 12/13/
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.11 Simple 12:56 AM 17%). a mathxl.com FINA3120 Fall 2017 Winifred Afrane 12/13/17 12:55 AM Homework: Chapter 12 Save Score: 0 of 1 pt 701946 complete) HW Score: 61.11%,5.5 of 9 pts P 17-12 (static) Question Help Clovix Corporation has $50 million in cash, 10 million shares outstanding and a current share price of $30. Clovix is deciding whether to use the $50 million to pay animmediate special dividend of S5.00 per share, or to retain and rves"atthe risk-free rate of 10% and use the $5 mllon in interest earned to ncrease its regular annual dividend of $0.50 per share. Assume perfect capital markets a. Suppose Clovix pays the special dividend. How can a shareholder who would prefer an increase in the regular dividend create it on her own? b. Suppose Clovix increases its regular dividend. How can a shareholder who would prefer the special dividend create it on her own? aSuppose Clovix pays the special dividend. How can a shareholder who would prefer an increase in the regular dividend create it on her own? (Select the best choice below.) O A. Borrow $30 today and use it to buy a share of Clovix stock B. C. 0 D. Invest the $5.00 special dividend and earn interest of $0.50 per year Sell a share of Clovix stock for $30 today and invest the proceeds to earn $3.00 in interest Borrow S5 00 today and use the increase in the regular di der dto pay the nterest of$0.50 per year on the loan.Explanation / Answer
a- B.Invest the $5 special dividend, and earn interest of $0.50 per year
b- Borrow $5 today, and use the increase in the regular dividend to pay the interest of $0.50 per year on the loan.
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