1.) The Shrieves Corporation has $25,000 that it plans to invest in marketable s
ID: 2773377 • Letter: 1
Question
1.) The Shrieves Corporation has $25,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 8.75%, state of Florida muni bonds, which yield 4.5% (but are not taxable), and AT&T preferred stock, with a dividend yield of 7.25%. Shrieves's corporate tax rate is 40%, and 70% of the dividends received are tax exempt. Find the after-tax rates of return on all three securities. Round your answers to two decimal places.
After-tax rate of return on AT&T preferred stock:
2.) Talbot Enterprises recently reported an EBITDA of $9.0 million and net income of $2.7 million. It had $3.6 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
After-tax rate of return on AT&T bond: After-tax rate of return on Florida muni bonds:After-tax rate of return on AT&T preferred stock:
2.) Talbot Enterprises recently reported an EBITDA of $9.0 million and net income of $2.7 million. It had $3.6 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000.
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After-tax rate of return on AT&T bond: 8.75%*(1-40%) = 5.25% After-tax rate of return on Florida muni bonds: 4.5%Related Questions
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