Your corporation has a marginal tax rate of 35% and has purchased preferred stock in another company.The before-tax dividend yield on the preferred stock is 6.50%.What is the company's after-tax return on the preferred,assuming a 70% dividend exclusion? (Round your final answer to two decimal places. )

Question

Quizplus · Accepted Answer

The after-tax return is calculated by excluding 70% of the dividend from taxation and then applying the tax rate to the remaining 30%. The formula is: After-tax return = Dividend yield * (1 - (Tax rate * (1 - Exclusion rate))). Substituting the given values: 6.50% * (1 - (0.35 * 0.30)) = 5.82%.

Your Corporation Has a Marginal Tax Rate of 35% and Has