Van Dyke Corporation has a corporate tax rate equal to 31.00%.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

Van Dyke Corporation can exclude 70% of the dividend income from taxes. Therefore, only 30% of the dividend income is taxable. The after-tax yield is calculated as follows: After-tax yield = Before-tax yield * (1 - Tax rate * Taxable portion) = 8% * (1 - 0.31 * 0.30) = 7.26%.

Van Dyke Corporation Has a Corporate Tax Rate Equal to 31.00%.The