he Shrieves Corporation has $20,000 that it plans to invest in marketable securi
ID: 2636626 • Letter: H
Question
he Shrieves Corporation has $20,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 8.25%, state of Florida muni bonds, which yield 4% (but are not taxable), and AT&T preferred stock, with a dividend yield of 6.75%. Shrieves's corporate tax rate is 35%, and 70% of the dividends received are tax exempt. Find the after-tax rates of return on all three securities. Round your answers to two decimal places.
After-tax rate of return on AT&T bond % After-tax rate of return on Florida muni bonds % After-tax rate of return on AT&T preferred stock %Explanation / Answer
Answer:-
WN1 = preferred stock- 70% dividend are tax exempt, that means 30% are tax levied
dividend amount = $ 1,350
tax % on 30 % of dividend = 1350* 30% * 35%
= $ 141.75
particular AT & T Bonds AT & T Florida Muni bonds AT & T Preferred Stocks investment $ 20,000 $ 20,000 $ 20,000 yeild/dividend 8.25% 4% 6,75% yeild/dividend amount $ 1,650 $ 800 $ 1350 tax- 35% $ 577.5 not taxable $ 141.75 (WN1) net earning $ 1072.5 $ 800 1208.25Related Questions
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