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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 $110 per share

Assume that ABC inc. is considering an investment in the preferred stock of IBM Corporation. The preferred stock is currently selling for $110 per share with a $400 annual dividend. ABC Inc. anticipates a 1 year holding period and expects to sell the stock at $110. The corporation is at 35% average tax rate and the annual interest rate is 8%. Calculate the after tax rate of return.

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