Van Dyke Corporation has a corporate tax rate equal to 33%.The company recently purchased preferred stock in another company.The preferred stock has an 8% before-tax yield.What is Van Dyke's after-tax yield on the preferred stock? Assume a 70% dividend exclusion for tax on dividends.(Round your final answer to two decimal places. )

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Quizplus · Accepted Answer

11ea856c_8c00_1865_9aec_0f89cbd76883_TB1222_00 If a company buys preferred stock in another company,70% of the dividends are excluded from taxes.Therefore,the after-tax return will be:
After-tax dividend yield = Preferred dividend rate [1 - (1 - Div exclusion%)(T)]
After-tax dividend yield = 7.21%

Van Dyke Corporation Has a Corporate Tax Rate Equal to 33%.The