Multiple Choice
A corporation can earn 7.50% if it invests in municipal bonds.The corporation can also earn 8.20% (before-tax) by investing in preferred stock.Assume that the two investments have equal risk.What is the break-even corporate tax rate that makes the corporation indifferent between the two investments? Assume a 70.00% dividend exclusion for tax on dividends.(Do not round your intermediate answer and round your final answer to two decimal places. )
A) 28.74%
B) 31.02%
C) 28.46%
D) 27.89%
E) 35.28%
Correct Answer:
Verified
Correct Answer:
Verified
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