1. An investor recently purchased a corporate bond which yields 9 percent. The investor is in the 36 percent combined federal and state tax bracket. What is the bond's after-tax yield?
Personal After-Tax Yield
2. Corporate bond issued by Johnson Corporation currently yield 8 percent. Municipal bonds of equal risk currently yield 6 percent. At what tax rate would an investor be indifferent between these two bonds?
Corporate Tax Liability
3. The Talley Corporation had a taxable income of $365,000 for operations after all operating cost but before (1) interest charges of $50,000, (2) dividends received of $15,000, (3) dividend paid of $25,000, and (4) income taxes. What is the firm's income tax liability and its after-tax income? What are the company's marginal and average tax rates on taxable income?
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