8. What is the after-tax return to a corporation that buys a share of preferred stock at $45, sells it at year-end at $45, and receives a $5 year-end dividend? The firm is in the 20% tax bracket. Revenue = $5 For a company, taxable = $5 * 30% = $1.5 Tax = $1.5 * 20% = $0.3 After tax income = $5 - $0.3 = $4.7 Return $47/$45 10 44% -

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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8. What is the after-tax return to a corporation that buys a share of preferred stock at $45, sells
it at year-end at $45, and receives a $5 year-end dividend? The firm is in the 20% tax bracket.
Revenue = $5
For a company, taxable = $5 * 30% = $1.5
Tax = $1.5* 20% = $0.3
After tax income = $5 - $0.3= $4.7
Return $4.7/$45= 10.44%
Transcribed Image Text:8. What is the after-tax return to a corporation that buys a share of preferred stock at $45, sells it at year-end at $45, and receives a $5 year-end dividend? The firm is in the 20% tax bracket. Revenue = $5 For a company, taxable = $5 * 30% = $1.5 Tax = $1.5* 20% = $0.3 After tax income = $5 - $0.3= $4.7 Return $4.7/$45= 10.44%
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