In late 2014, GW Corporation invested $5 billion in Goldman Sachs by buying newly issued preferred stock with a 10% dividend yield. GWs marginal tax rate is 35%. Why do you think GW Corporation elected to buy preferred stock instead of debt from Goldman Sachs?

(A)Only 30% of the dividend received is taxable at corporate tax rate.

(Q2) If GW Corporation elected to buy debt from Goldman Sachs, what before-tax interest rate would GW have to earn on this debt in order to earn the same after-tax return on thepreferred stock?

(Q) 13.77%

Please explain how can I get answer for Q2. Thanks