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Find the after-tax return to a corporation that buys a share of preferred stock at $49, sells it at year-end at $49, and receives a $4 year-end dividend. The firm is in the 21% tax bracket.

This is what I got so far:

Before-tax:

(49-49)+4 = 4,

4/49 = 0.0816,

After-tax:

0.0816 (1-021) = 0.06448 or 6.45%
Answer
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rafikiedu09 3 weeks ago
Светило науки - 325 ответа - 0 помощи

After the tax return percent is 7.43%.

What is a tax return?

  • A tax return is a form or form filed with a duty authority that reports income, charges, and other material duty information.
  • Tax returns allow taxpayers to calculate their duty liability, schedule duty payments, or request refunds for the remittance of levies.
  • A tax return is the completion of attestation that calculates a reality’s or existent's income earned and the quantum of levies to be paid to the government or government associations or, potentially, back to the taxpayer.
  • Taxation is one of the biggest sources of income for the government.

The tax-return of the corporation will be calculated by providing a 70% of deduction to the preference dividend.

The total amount of preference dividend which will be taxable= (dividend amount*(1-.7)

= (4*.3)= 1.20.

The total amount of tax= (total preference dividend taxable*x tax rate)

= (1.2*.3)=.36

The total after tax amount of Return= (preference dividend-tax)= (4-.36)= 3.64.

There will be no capital gain because there is no change in the price of preference shares.

After tax return=(after tax dividend/purchase price)

= (3.64/49)

= 7.43%.

After the tax return percent is 7.43%.

Learn more about tax returns here: https://brainacademy.pro/question/27300507

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