Company A has a cash surplus.
The discount rate used for a typical project is the company’s weighted average cost of capital of 10%.
No investment projects will be available for at least 2 years.
Which of the following is currently most likely to increase shareholder wealth in respect of the surplus cash?
A . Investing in a 2 year bond returning 5% each year.
B . Investing in the local money market at 4% each year.
C . Maintaining the cash in a current account.
D . Paying the surplus cash as a dividend at the earliest opportunity.
Answer: D