What is the breakeven corporate tax rate

Assignment Help Finance Basics
Reference no: EM132234883

Mantle Corporation is considering two equally risky investments:

  • A $5,000 investment in preferred stock that yields 7.75%.
  • A $5,000 investment in a corporate bond that yields 10%.

What is the breakeven corporate tax rate that makes the company indifferent between the two investments? Assume a 70% dividend exclusion for tax on dividends. (Do not round your intermediate answer and round your final answer to two decimal places.)

Could you show me how to calculate the answer?

Reference no: EM132234883

Questions Cloud

Choice of two investment accounts : You have your choice of two investment accounts. Investment A is a 12 year annuity that features beginning of the month $1,500 investments
P-e ratio model and future price : Walmart (WMT) recently earned a profit of $3.13 per share and has a P/E ratio of 14.22. The dividend has been growing at a 12.5 percent rate over the past few
Find the internal rate of return for this investment : Question - Consider the following cash flows of a project. Year. Find the internal rate of return for this investment
Evaluate the effects of macroeconomic indicators : Consider your last big purchase such as a car, appliances, home repairs, home purchase, computer equipment, college tuition, or another "big-ticket" item.
What is the breakeven corporate tax rate : What is the breakeven corporate tax rate that makes the company indifferent between the two investments? Assume a 70% dividend exclusion for tax on dividends.
Calculate the treasury bill''s holding period yield : A U.S. Treasury bill with a face value of $100,000 and 120 days until maturity is selling for $98,500.
Identify the physical attributes of the product : Identify the physical attributes, customer benefits, and competitive advantages of the product (or service) to be offered by the organization.
What will be the yield on your investment : The euro's spot exchange rate is $1.40. What will be the yield on your investment if you invest in euros?
Prepare an income statement for the shop : Depreciation on the repair tools will be $27,000. Prepare an income statement for the shop based on these estimates. The tax rate is 30%.

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Substitute this expression for beta into the security market

The beta coefficient of an asset can be expressed as a function of the asset's correlation with the market as follows:a. Substitute this expression for beta into the Security Market Line (SML), Equation 5-9. This results in an alternative form of the..

  Hedging is the act of buying and selling financial claims

hedging is the act of buying and selling financial claims or using other financial tools in order to protect against

  What is best estimate of current stock price

The 3 and 6 month T-bills and the S&P500 are currently returning 3%, 3.76% and 8.2% per annum respectively. A Company earns a 15% rate of return on the 36%.

  What changes have occurred in the human service sector

what changes have occurred in the human service sector that have made government and private contributors more

  Percent and the discount rate

The sausage system will save the firm $170,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $29,000. If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV ..

  What is the sharp ratio

What is the sharp ratio and how do you find it? I know standard deviation is needed, but how do you know what the standard deviation is?

  Explain how breakeven analysis can be useful

Explain how breakeven analysis can be useful

  Mario and angelo co-own a popular italian restaurant

Mario and Angelo co-own a popular Italian restaurant. Their operating income for last year was $153,000. Both are in the 25% income tax bracket. The business income is equally shared by them. What was Mario's tax liability for last year assumi..

  What is the most common type of garch model used

Explain what is meant, by an Ito process. Explain why an ho process is more applicable to describing stochastic processes underlying asset prices as compared.

  Designation for respective life insurance policies

Which is the most appropriate beneficiary designation for their respective life insurance policies?

  What is the firm cost of debt

A firm has a weighted average cost of capital of 10.295 percent and a cost of equity of 14.7 percent. The debt-equity ratio is 0.75. Tax rate is 32%. What is the firm's cost of debt?

  What would the annual interest and earnings after taxes

What would the annual interest and earnings after taxes for the conservative and aggressive strategies be if the short-term and long-term interest rates.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd