The Omega Corporation has some excess cash it would like to invest in marketable securities for a long-term hold. Its Vice-President of Finance is considering three investments: (a) Treasury bonds at a 6 percent yield; (b) corporate bonds at a 9 percent yield; or (c) preferred stock at an 7 percent yield. Omega Corporation is in a 30 percent tax bracket and the tax rate on dividends is 15 percent. a-1. Compute the aftertax yields for the three investment options Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Aftertax yields a. Treasury bonds b. Corporate bonds c. Preferred stock % a-2. Which one of the three investments should she select based on the aftertax yields? O Preferred stock Treasury bonds Corporate bond
The Omega Corporation has some excess cash it would like to invest in marketable securities for a long-term hold. Its Vice-President of Finance is considering three investments: (a) Treasury bonds at a 6 percent yield; (b) corporate bonds at a 9 percent yield; or (c) preferred stock at an 7 percent yield. Omega Corporation is in a 30 percent tax bracket and the tax rate on dividends is 15 percent. a-1. Compute the aftertax yields for the three investment options Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Aftertax yields a. Treasury bonds b. Corporate bonds c. Preferred stock % a-2. Which one of the three investments should she select based on the aftertax yields? O Preferred stock Treasury bonds Corporate bond
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter10: Forecasting Financial Statement
Section: Chapter Questions
Problem 8QE
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