Solarcell Corporation Has $20,000 That It Plans to Invest in Marketable

question 42

Multiple Choice

Solarcell Corporation has $20,000 that it plans to invest in marketable securities.It is choosing between AT&T bonds that yield 11.00%,State of Florida municipal bonds that yield 8.00%,and AT&T preferred stock with a dividend yield of 9.00%.Solarcell's corporate tax rate is 39.00%,and 70.00% of the preferred stock dividends it receives are tax exempt.Assuming that the investments are equally risky and that Solarcell chooses strictly on the basis of after-tax returns,which security should be selected? Answer by giving the after-tax rate of return on the highest yielding security.

• A) 8.00%
• B) 9.12%
• C) 8.24%
• D) 7.44%
• E) 6.08%

---

Definitions:

Personal Identity

The concept of self that evolves from personal experiences, values, and beliefs, distinguishing an individual from others.

Management-labor Cooperation

A state of collaboration between company management and its workers, often aiming to improve working conditions, productivity, and communication.

Worker's Unionism

The collective organization of workers formed to protect and increase their rights and interests through collective bargaining.

Social Information-processing Model

A theory that describes how individuals perceive, interpret, and respond to social information, highlighting the cognitive processes involved in the social interaction.