14.2 The corporation's after-tax yield on the bonds is 10% - (.35 x 10%) = 6.5%. The...
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14.2 The corporation's after-tax yield on the bonds is 10% - (.35 x 10%) = 6.5%. The after-tax yield on the preferred is 8% -1.35 x (.30 x 8%)] = 7.16%. The preferred stock provides the higher after-tax rate despite its lower before-tax rate.
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Fundamentals Of Corporate Finance
ISBN: 9780073382302
6th Edition
Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus
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