Purchase Solution

# After Tax Yield and Tax Liability

Not what you're looking for?

1. An investor recently purchased a corporate bond which yields 9 percent. The investor is in the 36 percent combined federal and state tax bracket. What is the bond's after-tax yield?

2. Corporate bond issued by Johnson Corporation currently yield 8 percent. Municipal bonds of equal risk currently yield 6 percent. At what tax rate would an investor be indifferent between these two bonds?

3. The Talley Corporation had a taxable income of \$365,000 for operations after all operating cost but before
(1) interest charges of \$50,000,
(2) dividends received of \$15,000,
(3) dividend paid of \$25,000, and
(4) income taxes. What is the firm's income tax liability and its after-tax income?
What are the company's marginal and average tax rates on taxable income?

##### Solution Summary

The solution explains how to calculate the after tax yield and tax liability with all calculations clearly displayed.

##### Solution Preview

Personal After-Tax Yield
1. An investor recently purchased a corporate bond which yields 9 percent. The investor is in the 36 percent combined federal and state tax bracket. What is the bond's after-tax yield?

The bonds after tax yield is given as Pre tax yield X (1-tax rate)
After Tax Yield = 9% X (1-0.36) = 9%X0.64=5.76%

Personal After-Tax Yield
2. Corporate bond issued by Johnson Corporation currently yield 8 percent. Municipal bonds of equal risk currently yield 6 percent. At what tax rate ...

##### Free BrainMass Quizzes

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

##### Lean your Process

This quiz will help you understand the basic concepts of Lean.

##### Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.