Expected after-tax yield on investment “a”.

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Answer 1

Question

Chapter 30, Problem 31PS

a.

Summary Introduction

To determine: Expected after-tax yield on investment “a”.

b.

Summary Introduction

To determine: Expected after-tax yield on a Treasury bill which will yield 10% pre-tax.

c.

Summary Introduction

To determine: Expected after-tax yield on a floating-rate preferred stock will yield 7.5% pre-tax.

Summary Introduction

To determine: Whether there is any change if the investor is a corporation and the other factors need to consider to decide where to invest the spare cash.

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Suppose you are a wealthy individual paying 35% tax on income. What is the expected after-tax yield on each of the following investments? A municipal note yielding 7.0% pretax. A Treasury bill yielding 11.2% pretax. A floating-rate preferred stock yielding 7.4% pretax. How would your answer change if the investor is a corporation paying tax at 35%?

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 turnover

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.

Answer 2

Question

Chapter 30, Problem 31PS

a.

Summary Introduction

To determine: Expected after-tax yield on investment “a”.

b.

Summary Introduction

To determine: Expected after-tax yield on a Treasury bill which will yield 10% pre-tax.

c.

Summary Introduction

To determine: Expected after-tax yield on a floating-rate preferred stock will yield 7.5% pre-tax.

Summary Introduction

To determine: Whether there is any change if the investor is a corporation and the other factors need to consider to decide where to invest the spare cash.

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Answer 3

Question

Chapter 30, Problem 31PS

a.

Summary Introduction

To determine: Expected after-tax yield on investment “a”.

b.

Summary Introduction

To determine: Expected after-tax yield on a Treasury bill which will yield 10% pre-tax.

c.

Summary Introduction

To determine: Expected after-tax yield on a floating-rate preferred stock will yield 7.5% pre-tax.

Summary Introduction

To determine: Whether there is any change if the investor is a corporation and the other factors need to consider to decide where to invest the spare cash.

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Answer 4

Question

Chapter 30, Problem 31PS

a.

Summary Introduction

To determine: Expected after-tax yield on investment “a”.

b.

Summary Introduction

To determine: Expected after-tax yield on a Treasury bill which will yield 10% pre-tax.

c.

Summary Introduction

To determine: Expected after-tax yield on a floating-rate preferred stock will yield 7.5% pre-tax.

Summary Introduction

To determine: Whether there is any change if the investor is a corporation and the other factors need to consider to decide where to invest the spare cash.

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Answer 5

Chapter 30, Problem 31PS

a.

Summary Introduction

To determine: Expected after-tax yield on investment “a”.

b.

Summary Introduction

To determine: Expected after-tax yield on a Treasury bill which will yield 10% pre-tax.

c.

Summary Introduction

To determine: Expected after-tax yield on a floating-rate preferred stock will yield 7.5% pre-tax.

Summary Introduction

To determine: Whether there is any change if the investor is a corporation and the other factors need to consider to decide where to invest the spare cash.

Answer 6

Chapter 30, Problem 31PS

a.

Summary Introduction

To determine: Expected after-tax yield on investment “a”.

Answer 7

Chapter 30, Problem 31PS

a.

Summary Introduction

To determine: Expected after-tax yield on investment “a”.

Answer 8

b.

Summary Introduction

To determine: Expected after-tax yield on a Treasury bill which will yield 10% pre-tax.

Answer 9

b.

Summary Introduction

To determine: Expected after-tax yield on a Treasury bill which will yield 10% pre-tax.

Answer 10

c.

Summary Introduction

To determine: Expected after-tax yield on a floating-rate preferred stock will yield 7.5% pre-tax.

Answer 11

c.

Summary Introduction

To determine: Expected after-tax yield on a floating-rate preferred stock will yield 7.5% pre-tax.

Answer 12

Summary Introduction

To determine: Whether there is any change if the investor is a corporation and the other factors need to consider to decide where to invest the spare cash.

Answer 13

Summary Introduction

To determine: Whether there is any change if the investor is a corporation and the other factors need to consider to decide where to invest the spare cash.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 30 - Inventory What are the trade-offs involved in the...Ch. 30 - Prob. 2PS Ch. 30 - Prob. 3PS Ch. 30 - Prob. 4PS Ch. 30 - Prob. 5PS Ch. 30 - Prob. 6PS Ch. 30 - Prob. 7PS Ch. 30 - Credit policy How should your willingness to grant...Ch. 30 - Cash management Complete the passage that follows...Ch. 30 - Prob. 10PS

Expected after-tax yield on investment “a”.

Solution Summary: The author calculates the expected after-tax yield for an individual and a corporation.

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To determine: Expected after-tax yield on investment “a”.

To determine: Expected after-tax yield on a Treasury bill which will yield 10% pre-tax.

To determine: Expected after-tax yield on a floating-rate preferred stock will yield 7.5% pre-tax.

To determine: Whether there is any change if the investor is a corporation and the other factors need to consider to decide where to invest the spare cash.

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Chapter 30 Solutions