What is the after-tax return on the best investment alternative?
Posted on January 9, 2009 by admin
Karen asked:
West Corporation has $50,000 which it plans to invest in marketable securities. The corporation is choosing between the following three equally risky securities: Alachua County tax-free municipal bonds yielding 6%; Exxon bonds yielding 9.5%; GM preferred stock with a dividend yield of 9%. West Corporation tax rate is 35%. What is the after-tax return on the best investment alternative? (Assume the company chooses on the basis of tax-returns)
West Corporation has $50,000 which it plans to invest in marketable securities. The corporation is choosing between the following three equally risky securities: Alachua County tax-free municipal bonds yielding 6%; Exxon bonds yielding 9.5%; GM preferred stock with a dividend yield of 9%. West Corporation tax rate is 35%. What is the after-tax return on the best investment alternative? (Assume the company chooses on the basis of tax-returns)
Do your own school work so YOU will learn something. That is what an education is all about. What you put in your head you have for life.
If you learn to do this, someday you will have the $50,000 to invest. So, it’ll pay off.
This isn’t complicated math.