Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Corporate After-Tax Yield
The Shrieves Corporation has $15,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds (which yield 5.9%), AT&T preferred stock (with a dividend yield of 5.0%), and
state of Florida muni bonds (which yield 4% but are not taxable). The federal tax rate is 21% (ignore any possible state corporate taxes). Recall that 50% of dividends received are tax exempt. Find
the after-tax rates of return on all three securities after paying federal corporate taxes. Round your answers to three decimal places.
After-tax rate of return on AT&T bond:
%
After-tax rate of return on AT&T preferred stock:
After-tax rate of return on Florida muni bonds:
%
The Shrieves Corporation has $10,000 that it plans to invest in marketablesecurities. It is choosing among AT&T bonds, which yield 7.5%, state of Florida muni bonds, which yield 5% (but are not taxable), and AT&T preferredstock, with a dividend yield of 6%. The corporate tax rate is 35%, and 70% ofthe dividends received are tax exempt. Find the after-tax rates of return on allthree securities.
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%
Chapter 6 Solutions
Intermediate Financial Management
Ch. 6 - Prob. 1QCh. 6 - If a “typical” firm reports $20 million of...Ch. 6 - Prob. 3QCh. 6 - What is operating capital, and why is it...Ch. 6 - Explain the difference between NOPAT and net...Ch. 6 - Prob. 6QCh. 6 - Prob. 7QCh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3P
Ch. 6 - Prob. 4PCh. 6 - Kendall Corners Inc. recently reported net income...Ch. 6 - In its most recent financial statements,...Ch. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Prob. 17PCh. 6 - Prob. 18PCh. 6 - What effect did the expansion have on sales and...Ch. 6 - Prob. 2MCCh. 6 - Prob. 3MCCh. 6 - Prob. 4MCCh. 6 - What is Computron’s free cash flow (FCF)? What are...Ch. 6 - Calculate Computron’s return on invested capital...Ch. 6 - Cochran also has asked you to estimate Computrons...Ch. 6 - Prob. 8MC
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