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%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 1P
icon
Related questions
Question

Financial Accounting Question provide answer

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%
Transcribed Image Text: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%
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Managerial Accounting: The Cornerstone of Busines…
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Financial Reporting, Financial Statement Analysis…
Financial Reporting, Financial Statement Analysis…
Finance
ISBN:
9781285190907
Author:
James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:
Cengage Learning