A corporation recently purchased some preferred stock that has a before-tax yield of 6.50%.The company has a tax rate of 38%.What is the after-tax return 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_b4ad_9aec_4bb12a3ea0c7_TB1222_00 After-tax dividend yield = Preferred dividend rate [1 - (1 - Div exclusion%)(T)]
After-tax dividend yield = 5.76%

A Corporation Recently Purchased Some Preferred Stock That Has a Before-Tax