Calculation of after tax return
Course:- Finance Basics
Reference No.:- EM1359102

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The Omega Corporation has some excess cash that it would like to invest in marketable securities for a long-term hold. Its vice-president of finance is considering three investments (Omega Corporation is in a 35 percent tax bracket and the tax rate on dividends is 15 percent). Which one should she select based on aftertax return: (a) Treasury bonds at a 9 percent yield; (b) corporate bonds at a 12 percent yield; or (c) preferred stock at a 10 percent yield?

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