The Omega Corporation has some excess cash it would like to invest in marketable securities for a long-term hold. Its Vice-President of Finance is considering three investments: (a) Treasury bonds at a 6 percent yield; (b) corporate bonds at a 9 percent yield; or (c) preferred stock at an 7 percent yield. Omega Corporation is in a 30 percent tax bracket and the tax rate on dividends is 15 percent. a-1. Compute the aftertax yields for the three investment options Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Aftertax yields a. Treasury bonds b. Corporate bonds c. Preferred stock % a-2. Which one of the three investments should she select based on the aftertax yields? O Preferred stock Treasury bonds Corporate bond

The Omega Corporation has some excess cash it would like to invest in marketable securities for a long-term hold. Its Vice-President of Finance is considering three investments: (a) Treasury bonds at a 6 percent yield; (b) corporate bonds at a 9 percent yield; or (c) preferred stock at an 7 percent yield. Omega Corporation is in a 30 percent tax bracket and the tax rate on dividends is 15 percent. a-1. Compute the aftertax yields for the three investment options Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Aftertax yields a. Treasury bonds b. Corporate bonds c. Preferred stock % a-2. Which one of the three investments should she select based on the aftertax yields? O Preferred stock Treasury bonds Corporate bond

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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