A Company with a 15% Tax Rate Buys Preferred Stock

question 52

Multiple Choice

A company with a 15% tax rate buys preferred stock in another company.The preferred stock has a before-tax yield of 8%.What is the preferred stock's after-tax return?

• A)6.90%
• B)7.26%
• C)7.64%
• D)8.02%
• E)8.42%

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Definitions:

Ventricles

Hollow structures within the heart and brain; in the heart, they are chambers that pump blood out to the body and lungs; in the brain, they produce and store cerebrospinal fluid.

Vestibulocochlear Nerve

A cranial nerve responsible for hearing and balance, transmitting information from the inner ear to the brain.

Cranial Nerves

Twelve pairs of nerves that emerge directly from the brain, rather than the spinal cord, serving various sensory and motor functions in the head and neck.

Sensory Nerves

Nerves that transmit information from sensory receptors to the brain and spinal cord, allowing for the perception of stimuli.