Compare the after-tax returns for a corporation that invests in preferred stock with a 12% dividend yield versus a common stock with no dividend but a 16% capital gain. The corporation's tax rate is 21%. The:Multiple Choice common stock returns 2.32% less than the preferred. preferred stock returns 1.90% less than the common. returns are equal on an after-tax basis. common stock returns 2.60% less than the preferred.

Dividend is the sharing of earnings by a corporation to its stockholders. When a corporation earns a…

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Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 9P

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Compare the after-tax returns for a corporation that invests in preferred stock with a 12% dividend yield versus a common stock with no dividend but a 16% capital gain. The corporation's tax rate is 21%. The:

Multiple Choice

common stock returns 2.32% less than the preferred.
preferred stock returns 1.90% less than the common.
returns are equal on an after-tax basis.
common stock returns 2.60% less than the preferred.

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