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Fin650_fcordero-Week2

# Fin650_fcordero-Week2 - Calculate Solutions to Assigned...

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Calculate Solutions to Assigned Problems (7 Points) 1) Chapter 3 – Problems 1, 2, 3, and 5; Chapter 4 – Problems 7, 8, 9, and 10 An investor recently purchased a corporate bond which yields 9%. The investor is in the 36% combined federal an 9%(1 ' 0.36) = 5.76% or 5.8%

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and state tax bracket. What is the bond’s after-tax yield?
Calculate Solutions to Assigned Problems (7 Points) 1) Chapter 3 – Problems 1, 2, 3, and 5; Chapter 4 – Problems 7, 8, 9, and 10 Corporate bonds issued by Johnson Corporation currently yield 8%. Municipal bonds of equal risk currently yield 6%. At what tax rate would an investor be indifferent between these two bonds? 0.75 0.25 a. 25%

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Calculate Solutions to Assigned Problems (7 Points) 1) Chapter 3 – Problems 1, 2, 3, and 5; Chapter 4 – Problems 7, 8, 9, and 10 Little Books Inc. recently reported \$3 million of net income. Its EBIT was \$6 million, and its tax rate was 40%. What was its interest expense? [Hint: Write out the headings for an income statement and then fill in the known values. Then divide \$3 million net income by (1–T) 0.6 to find the pre-tax income. The difference
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