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Assume that ABC Inc. is considering an investment in the preferred stock of IBM Corporation. The preferred stock is currently selling for $100 per share

Assume that ABC Inc. is considering an investment in the preferred stock of IBM Corporation. The preferred stock is currently selling for $100 per share with a $5.00 annual dividend. ABC Inc. anticipates a one-year holding period and expects to sell the stock at $100. The corporation is at a 20% average tax rate and the annual interest rate is 8%. Calculate the after-tax rate of return.

A. 0.0360

B. 0.0450

C. 0.0413

D. 0.0340

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