{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

final - Arvo Corporation is trying to choose between three...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Arvo Corporation is trying to choose between three alternative investments. The three securities that the company is considering are as follows: The company’s tax rate is 34%. What is the after-tax return on the best inve Amount Tax AT PT Return Taxable Rate Return Muni Bond 8.80% 0% 34% 8.800% Corp Bond 11.75% 100% 34% 7.755% P. Stock (Div) 8.50% 30% 34% 7.633% The company’s tax rate is 35%. Amount Tax AT PT Return Taxable Rate Return Muni Bond 7.00% 0% 35% 7.000% AB Corp Bond 11.50% 100% 35% 7.475% XZ P. Stock (Div) 10.00% 30% 35% 8.950% · Tax-free municipal bonds with a return of 8.8%. · Wooli Corporation bonds with a return of 11.75%. · CFI Corp. preferred stock with a return of 8.5%. yield of 10 percent. XYZ's  corporate tax rate is 35  percent. What is the after-tax  return on the best investment  alternative? (Assume the  company chooses on the basis  of after-tax returns.) What is the after-tax  return on the best  investment alternative?  (Assume the company  chooses on the basis of  after-tax returns.)  (Points:  20) · Tax-free municipal bonds with a return of 7%. · AB bonds with a return of 11.5%. · XZ Corp. preferred stock with a return of 10%.
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
The company’s tax rate is 35%. What is the after-tax return on the best inve Amount Tax AT PT Return Taxable Rate Return Muni Bond 8.00% 0% 35% 8.000% Corp Bond 11.50% 100% 35% 7.475% P. Stock (Div) 12.00% 30% 35% 10.740% After-tax returns dividend yield of 12 percent. ABC's corporate tax rate is 35 percent. What is the after-tax return on the best investment alternative? (Assume the company chooses on the basis of after- tax returns.) · Tax-free municipal bonds with a return of 8%. · Wooli Corporation bonds with a return of 11.5%. · CFI Corp. preferred stock with a return of 12%. stock with a dividend yield of 10  percent. XYZ's corporate tax rate  is 35 percent. What is the after- tax return on the best investment  alternative? (Assume the  company chooses on the basis of  after-tax returns.)  (Points: 20)
Background image of page 2
estment alternative? 4.0250000% 7.4750000% 1.0500000% 8.9500000%
Background image of page 3

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

View Full Document Right Arrow Icon
estment alternative?
Background image of page 4
d. $828 Bond value - semiannual payment Financial calculator solution: Inputs: N = 40; I = 5; PMT = 40; FV = 1,000. Bond value - semiannual payment 1. Bond value - semiannual payment Assume that you wish to purchase a 20-year bond that has  a maturity value of $1,000 and makes semiannual interest  payments of $40. If you require a 10 percent nominal yield to  maturity on this investment, what is the maximum price you  should be willing to pay for the bond? Output: PV = -$828.41; V B ÷  $828. Assume that you wish to purchase a 10-year bond that has  a maturity value of $1,000 and makes semiannual interest  payments of $50. If you require a 10 percent nominal yield to  maturity on this investment, what is the maximum price you  should be willing to pay for the bond?
Background image of page 5

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

View Full Document Right Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}