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 8.50%; Exxon Mobil bonds yielding 10.50%; and GM preferred stock with a dividend yield of 9.25%. West's corporate tax rate is 32.00%. What is the after-tax return on the best investment alternative? Assume a 70.00% dividend exclusion for tax on dividends. (Assume the company chooses on the basis of after-tax returns. Round your final answer to 3 decimal places.)
A. 9.690%
B. 7.820%
C. 8.585%
D. 8.500%
E. 10.625%
Answer: D
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