EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 2, Problem 9PS
Summary Introduction
To calculate:The after-tax return to a Corporation in case of buying and selling of preferred stocks.
Introduction:
Dividend: A company promptly pays some money to its shareholders from the profit it earns on a regular basis. This money is called dividend.
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Find the after-tax return to a corporation that buys a share of preferred stock at $58, sells it at year-end at $58, and receives a $4 year-end dividend. The firm is in the 21% tax bracket. (Round your answer to 2 decimal places.)
Find the after-tax return to a corporation that buys a share of preferred stock at $45, sells it at year-end at $45, and receives a $3 year-end dividend. The firm is in the 30% tax bracket.
Required:
Find the after-tax return to a corporation that buys a share of preferred stock at $40, sells it at year-end at $40, and receives a
$4 year-end dividend. The firm is in the 21% tax bracket. (Round your answer to 2 decimal places.)
After-tax rate of return
%
Chapter 2 Solutions
EBK INVESTMENTS
Ch. 2 - Prob. 1PSCh. 2 - Prob. 2PSCh. 2 - Prob. 3PSCh. 2 - Prob. 4PSCh. 2 - Prob. 5PSCh. 2 - Prob. 6PSCh. 2 - Prob. 7PSCh. 2 - Prob. 8PSCh. 2 - Prob. 9PSCh. 2 - Prob. 10PS
Ch. 2 - Prob. 11PSCh. 2 - Prob. 12PSCh. 2 - Prob. 13PSCh. 2 - Prob. 14PSCh. 2 - Prob. 15PSCh. 2 - Prob. 16PSCh. 2 - Prob. 17PSCh. 2 - Prob. 18PSCh. 2 - Prob. 19PSCh. 2 - Prob. 20PSCh. 2 - Prob. 21PSCh. 2 - Prob. 22PSCh. 2 - Prob. 1CPCh. 2 - Prob. 2CPCh. 2 - Prob. 3CPCh. 2 - Prob. 4CPCh. 2 - Prob. 5CP
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Albion Inc. provided the following information for its most recent year of operations. The tax rate is 40%. Required: 1. Compute the following: (a) return on sales, (b) return on assets, (c) return on stockholders equity, (d) earnings per share, (e) price-earnings ratio, (f) dividend yield, and (g) dividend payout ratio. 2. CONCEPTUAL CONNECTION If you were considering purchasing stock in Albion, which of the above ratios would be of most interest to you? Explain.arrow_forwardA corporation buys a share of preferred stock at $40 and sells it at year-end at $40, andreceives a $4 year-end dividend. The firm is in the 30% tax bracket. What is the after-tax return to the corporation?arrow_forwardRequired: Find the after-tax return to a corporation that buys a share of preferred stock at $40, sells it at year-end at $40, and receives a $4 year-end dividend. The firm is in the 21% tax bracket.arrow_forward
- Find the after-tax return to a corporation that buys a share of preferred stock at $42, sells it at year-end at $42, and receives a $5 year-end dividend. The firm is in the 30% tax bracket. (Do not round intermediate calculations. Round your answer to 2 decimal places.)arrow_forwardThe current stock price of a company is $100 a share. This company announces a dividend of $5 a share. On ex-dividend day the stock price drops $4 to $96 a share. If the tax rate on dividends, D, is 30%, what is the implied tax rate on capital gains, G? You are a tax-exempt institution, and you plan to sell 100 shares (that you already own) of this stock; would you sell them cum- or ex-dividend?arrow_forward8. What is the after-tax return to a corporation that buys a share of preferred stock at $45, sells it at year-end at $45, and receives a $5 year-end dividend? The firm is in the 20% tax bracket. Revenue = $5 For a company, taxable = $5 * 30% = $1.5 Tax = $1.5* 20% = $0.3 After tax income = $5 - $0.3= $4.7 Return $4.7/$45= 10.44%arrow_forward
- You buy a stock for $47 per share and sell it for $58 after holding it for slightly over a year and collecting a $5.9 per share dividend. If dividend income is taxed at a 28% rate and capital gains are taxed at 24%, what is your after-tax holding period return?arrow_forwardYou buy a stock for $47 per share and sell it for $50 after holding it for slightly over a year and collecting a $4 per share dividend. If dividend incone is taxed at a 20% rate and capital gains are taxed at 25%, what is your after tax holding period return? (Write your answer in percentage and round it to 2 decimal places)arrow_forwardbuy a stock for $41 per share and sell it for $59 after holding it for slightly over a vear and collecting a $4.7 per share dividend, If dividend income is taxed at a 25% rate and capital gains are taxed at 29%, what is your after-tax holding period return? (Write your answer in percentage and round it to 2 decimal places)arrow_forward
- Suppose a firm in the 40% federal-plus-state tax bracket needs to pay $1 in dividends to its shareholders. What is the pretax income it should have to pay this dividend? $1.00 $1.67arrow_forwardOne year ago, you purchased stock ABC at price $10. During the year, the company paid $1 per share as taxable dividend. If you sell the stock at $13 today, what would be your realized after - tax return? Assume your marginal personal tax rate on income is 30% and the dividend tax credits of 12% can be applied. a. 29.65% b. 40% c. 33.7% d. 31.8%arrow_forwardDetermine the after-tax dividend for a superannuation fund that pays 15% tax on its income on its 120,000 shareholding in a company that earned $8.15, has a franking credit of 75%, pays tax at 30% and has a dividend payout ratio of 72%.arrow_forward
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