Company A has a cash surplus.

CIMA F3 Question Answer

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?

Investing in a 2 year bond returning 5% each year.

Investing in the local money market at 4% each year.

Maintaining the cash in a current account.

Paying the surplus cash as a dividend at the earliest opportunity.

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