Week_2_Homework__FI_515_Caryl_versionSept07_Online_KEY[1] -...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Week 2 Homework Answer Key FI 515 1) The Walsh Trading Company is in the 35% marginal tax bracket. What would be its after-tax yield from investing in each of the following securities? SHOW ALL WORK. a. US Treasury bond paying 8.0% interest. (.08)(1-T) = (.08)(1- .35) = (.08)(.65) = .052 or 5.2% b. Municipal bond paying 5.2% interest. Interest on municipal bonds is NOT taxable at the federal level: (.052)(1-T) = (.052)(1- .00) = (.052)(1.00) = .052 or 5.2% c. Preferred stock paying a 5.81% annual dividend yield. Dividends received by a corporation as a result of owning stock (preferred as well as common) are up to 70% tax free: (.0581)[1-(.30)(.35)] = (.0581)(1- .105) = (.0581)(.895) = .052 or 5.2% 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2) Santo Chili Corporation has sales of $15,000,000, cost of goods sold of $6,000,000, selling and administrative costs of $2,500,000, and depreciation expense of $500,000. Santo also paid $200,000 of interest expense and received $150,000 of dividends from other corporations. Santo Chili had a long-term capital gain of $400,000 and paid
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 5

Week_2_Homework__FI_515_Caryl_versionSept07_Online_KEY[1] -...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online