Three Waters Co$.$ currently has $$1\mathrm{.}1$ billion in cash on its balance sheet. The CFO thinks the firm will need $$600$ million in cash to finance operations for the next year. The CFO has recommended that the firm keep the excess cash in a marketable securities portfolio to allow for unexpected costs. However, the board of directors has decided that the firm will pay this money out to the shareholders in the form of a cash dividend.

The board$$s decision is extremely risky and not very practical.

The board$$s decision will give management the incentive to make decisions that are not in the shareholders$$ best interest.

The board$$s decision will help align management$$s interests with the shareholders$$ interests.