Preferred Stock A corporation buys preferred stock at $66, holds it one year and sells it...

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Preferred Stock A corporation buys preferred stock at $66, holds it one year and sells it...

Preferred Stock A corporation buys preferred stock at $66, holds it one year and sells it at $66 after collecting a $5 dividend. The firm's tax rate is 33%. The firm's after tax rate of return is ______.

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Answer 1

Answer #1

Ans :

Firms pre tax rate of return = ( Dividend ) / Purchase price

= $ 5 / $ 66 * 100

= 7.57 %

After tax rate of return = 7.57 % (1-tax rate)

= 7.57 % (1-33%)

= 7.57% (67%)

= 5.0719 %

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Answer 2

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Preferred Stock A corporation buys preferred stock at $66, holds it one year and sells it...

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A corporation buys preferred stock at $67, holds it one year and sells it at $67...

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