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% -
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% -
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 7P
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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%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3f1936f2-45b1-49b2-a13c-cd294f9a8602%2Fb4bf10b6-d8f7-46c6-bfba-1c3660d18e96%2Fay7ogg_processed.jpeg&w=3840&q=75)
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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