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West Corporation has $50,000 that it plans to invest in marketable securities. The corporation is choosing between the following three equally risky securities: Alachua County
West Corporation has $50,000 that it plans to invest in marketable securities. The corporation is choosing between the following three equally risky securities: Alachua County tax-free municipal bonds yielding 8.5%; Exxon Mobil bonds yielding 10.5%; and GM preferred stock with a dividend yield of 9.25%. Wests corporate tax rate is 15%. What is the after-tax return on the best investment alternative? Assume a 70% dividend exclusion for Tax on Dividends. (Assume the company chooses on the basis of after-tax returns.)
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