Andrea Houser recently inherited $500,000. She would like to invest the money and receive an annual after-tax return of $30,000 on the investment income. She has a number of investment alternatives available to her. Based on the combination of federal and provincial rates in her province, she would pay 45% tax on interest, 28% tax on eligible dividends, 37% tax on non-eligible dividends, and 23% tax (rounded) on capital gains.
Required:
A) Calculate how much taxable income Andrea would need to receive in (i) interest, (ii) eligible dividends, (iii) non-eligible dividends, and (iv) capital gains in order to realize a $30,000 after-tax return. (Round all answers to zero decimal places.)
B) What is Andrea's pre-tax rate of return on each of the investments? (Round all answers to one decimal place.)
C) Calculate Andrea's after-tax rate of return (rounded to zero decimal places) on each of the investments, using her tax rates given in the problem to arrive at your answers.
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