10. A property produces an after tax internal rate of return of 12.24%. If the i
ID: 2803411 • Letter: 1
Question
10. A property produces an after tax internal rate of return of 12.24%. If the investor has a marginal tax rate of 31%, what is the before-tax equivalent yield? (D) (A)8.45% (B)11.39% (C)16.03% (D)17.74%10. A property produces an after tax internal rate of return of 12.24%. If the investor has a marginal tax rate of 31%, what is the before-tax equivalent yield? (D) (A)8.45% (B)11.39% (C)16.03% (D)17.74%
10. A property produces an after tax internal rate of return of 12.24%. If the investor has a marginal tax rate of 31%, what is the before-tax equivalent yield? (D) (A)8.45% (B)11.39% (C)16.03% (D)17.74%
10. A property produces an after tax internal rate of return of 12.24%. If the investor has a marginal tax rate of 31%, what is the before-tax equivalent yield? (D) (A)8.45% (B)11.39% (C)16.03% (D)17.74%
Explanation / Answer
before-tax equivalent yield(1-tax rate)=after-tax equivalent yield
Hence
before-tax equivalent yield=12.24/(1-0.31)
=12.24/0.69
which is equal to
=17.74%(D)(Approx).
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