instructions help Question 15 (of 15) Save & Exit Submit value 10.00 points Find

Question

instructions help Question 15 (of 15) Save & Exit Submit value 10.00 points Find the after-tax return to a corporation that buys a share of preferred stock at $46, sells it at year-end at $46, and receives a $4 year-end dividend. The firm is in the 30% tax bracket. (Round your answer to 2 decimal places.) After-tax rate of return References eBook & Resources Learning Objective: 02-01 Distinguish among the major assets that trade in money markets and in capital markets Worksheet Scr 17-0 reless CIMS Check my work

Explanation / Answer

Since the firm buys the share and sells it at $46, the capital gain is $0

Year end dividend = $4

Tax at 30% would mean, the net gain of = 4*(1-0.3) = $2.8

After tax return = 2.8/46 = 0.060869 = 6.0869% = 6.09%

After tax return = 6.09% (Rounded to two decimals)

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