XYZ Corporation Is Issuing Preferred Stock Yielding 10%,and ABC Corporation

question 2

Multiple Choice

XYZ corporation is issuing preferred stock yielding 10%,and ABC Corporation is considering buying the stock.XYZ's tax rate is 20% and ABC's tax rate is 34%.What is the aftertax preferred yield for ABC?

• A) 3.4%
• B) 10.0%
• C) 6.6%
• D) 8.98%

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Definitions:

Variance

A calculation of how spread out a data set is, determined by the mean of the squared deviations from the average.

Least Squares Estimates

A statistical method used to determine the line of best fit by minimizing the sum of squares of the errors between observed and predicted values.

Slope

In mathematics and statistics, it represents the rate at which a line inclines or declines, showing the change in the dependent variable for a unit change in the independent variable.

Y-Intercept

The location at which a line or curve crosses the y-axis in a coordinate system.