Its investment bankers have told Donner Corporation that it can issue a 25-year, 7.6% annual payment bond at par. They also stated that the company can sell an issue of annual payment preferred stock to corporate investors who are in the 40% tax bracket. The corporate investors require an after-tax return on the preferred that exceeds their after-tax return on the bonds by 1.3%, which would represent an after-tax risk premium. What coupon rate must be set on the preferred in order to issue it at par? Do not round your intermediate calculations.
A. 6.66%
B. 4.99%
C. 5.99%
D. 7.33%
E. 7.66%
Answer: A
You might also like to view...
List three important guidelines for cell phone usage.
What will be an ideal response?
Why is it important to understand different personalities?
What will be an ideal response?
When fast food restaurant Tommy's Tacos had poor sales in Central City, marketing managers closed one outlet on the east side of town and opened two new locations on the south side of town. These moves represent
A. strategy policies in the Place area. B. operational decisions in the Place area. C. operational decisions in the Product decision area. D. strategy policies in the Promotion area. E. strategy policies in the Product area.
Highly automated batch processes that can reduce the cost of making similar groups of products are:
A) functional layouts. B) flexible manufacturing systems. C) make-to-stock. D) adjacent processes.