Financial Accounting Question provide answer A corporation recently purchased some preferred stock that hasa before-tax yield of 5.25%. The company has a tax rate of 38%.What is the after-tax return on the preferred stock? Assume a70% dividend exclusion for tax on dividends.a. 3.49%b. 4.65%c. 4.98%d. 4.74%e. 4.60%

Step 1: Define Rate of Return vs. Cost of CapitalThe rate of return on a stock or bond is the…

Answered: A corporation recently purchased some…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 1P

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A corporation recently purchased some preferred stock that has a before-tax yield of 5.25%. The company has a tax rate of 38%. What is the after-tax return on the preferred stock? Assume a 70% dividend exclusion for tax on dividends. a. 3.49% b. 4.65% c. 4.98% d. 4.74% e. 4.60%