A Corporation Recently Purchased Some Preferred Stock That Has a Before-Tax

question 67

Multiple Choice

A corporation recently purchased some preferred stock that has a before-tax yield of 7%.The company has a tax rate of 38%.What is the after-tax return on the preferred stock?

• A)5.32%
• B)5.60%
• C)5.89%
• D)6.20%
• E)6.51%

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Definitions:

Drum

A cylindrical member that rotates and is part of a machine, such as in a drum brake where it provides the surface against which brake shoes press.

Brake Rotor

A component of disc brakes used in automotive and other applications, designed to provide a friction surface for the brake pads to slow or stop the vehicle.

Contact Area

The surface or region where two objects meet or press against each other, often critical for the transfer of force or heat.

Duo-servo Brakes

A type of drum brake system where each shoe acts as a servo to the other, enhancing braking efficiency, commonly found in heavier vehicles.