Suncell Corporation has R20,000 which it plans to invest in marketable securities.It is choosing between AT&T bonds which yield 11%, City of Tshwane municipal bonds which yield 8%, and AT&T preference shares with a dividend yield of 9%.Suncell's corporate tax rate is 40%, and 70% of the preference share dividends it receives are tax exempt.Assuming that the investments are equally risky and that Suncell chooses strictly on the basis of after-tax returns, which security should be selected? Answer by giving the after-tax rate of return on the highest yielding security.

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The Answer of Suncell Corporation has R20,000 which it plans to invest in marketable securities.It is choosing between AT&T bonds which yield 11%, City of Tshwane municipal bonds which yield 8%, and AT&T preference shares with a dividend yield of 9%.Suncell's corporate tax rate is 40%, and 70% of the preference share dividends it receives are tax exempt.Assuming that the investments are equally risky and that Suncell chooses strictly on the basis of after-tax returns, which security should be selected? Answer by giving the after-tax rate of return on the highest yielding security.

Suncell Corporation Has R20,000 Which It Plans to Invest in Marketable