Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal bond with a 5.93% before-tax yield. At what marginal tax rate would the investor be indifferent between investing in the corporate and investing in the muni? O 23.7% O 15.4% 12.4% O 17.3%
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- Assume that the return on tax-exempt securities is 0.09 and that tp = 0.3, tg = 0.15, and te = 0.35, where tg is the rate on capital gains, te is the corporate tax rate, and to is the personal tax rate on dividends and interest. Equilibrium conditions exist. a. The return to investors on taxable bonds raised as new capital can be expected to be b. The return to investors on common stock (all capital gains) raised as new capital can be expected to be c. If taxable debt is issued, the company will have to earn before tax, and if common stock is issued the firm will have to earn before tax. d. If taxable debt is issued, the company will have to earn before tax, and if common stock is issued the firm will have to earn before tax.Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal bond with a 5.93% before-tax yield. At what marginal tax rate would the investor be indifferent between investing in the corporate and investing in the muni? A) 15.4% B) 23.7% C) 39.5% D) 17.3% E) 12.4%Please provide justification7) Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal bond with a 5.93% before-tax yield. At what marginal tax rate would the investor be indifferent between investing in the corporate and investing in the muni?
- How do you determine the Cost of Equity? Ask your stockholders, or their representatives on the Board of Directors Take the risk-free rate and add the product of your equity beta and the market risk premium Multiply your cost of debt by 1 minus the tax rate Subtract your cost of debt from your WACCA corporation can earn 7.5% if it invests in municipal bonds. The corporation can also earn 8.5% (before-tax) by investing in preferred stock. Assume that the two investments have equal risk. What is the break-even corporate tax rate that makes the corporation indifferent between the two investments? Answer 35.39% 37.25% 39.22% 41.18% 43.24%. Pls correct with steps.1. You are in the 30% tax bracket (federal & state taxes combined). A corporate bond is yielding 9%. Assuming that all non-tax features (e.g. risk) are identical, what yield would a municipal bond ("Muni") have to offer in order for you to prefer it over the corporate?
- Show the tax benefit (per dollar invested) that exists on a municipal bond with a yield of 8U basis points (where one basis point is 0.01%, so that, for example, the yield would be 0.08%x45=3.60% for U=45) for an investor in the marginal 37% tax bracket. U=12Q1. Given, interest rate or coupon rates or dividend rate of the following - Corporate bond = 6.5% Municipal bond = 4% Preferred stock = 5% and Corporate tax rate = 45% Note - 70% of the dividends received are tax exempt . a. What is the after tax return of corporate bond, municipal bond and preferred stock? b. What will be the best choice to invest?An investor purchases one municipal and one corporate bond that pay rates of return of 7.2% and 9.1%, respectively. If the investor is in the 15% marginal tax bracket, his or her and _, respectively. after-tax rates of return on the municipal and corporate bonds would be 7.2%;7.735% 8.471%:9.1% O 7.2%;9.1% 6.12%;7.735%
- If a taxpayer's marginal tax rate is 33 percent, what is the after-tax yield on a corporate bond that pays 5 percent interest? If the average marginal tax rate of all taxpayers is 50 per- cent, will the taxpayer with the 33 percent marginal tax rate prefer a corporate or a mu- nicipal security? Assume equivalent safety and maturity.If the state tax rate is 20% and the federal tax rate is 30%, what is the total effective tax rate? a. 34% b. 50% c. 44% d. 37% 2. Holding all other variables constant, which of the following would increase return on equity? An increase in _____________. a. the tax rate b. the equity ratio (equity/total assets) c. total assets d. total asset turnover1. Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal bond with a 5.93% before-tax yield. At what marginal tax rate would the investor be indifferent between investing in the corporate and investing in the muni? 2. The Profitability Fund had NAV per share of $17.50 on January 1, 2012. On December 31 of the same year, the fund's NAV was $19.47. Income distributions were $0.75, and the fund had capital gain distributions of $1.00. Without considering taxes and transactions costs, what rate of return did an investor receive on the Profitability Fund last year?