Q9 Six rights are necessary to purchase one share of Fogel stock at $48. A right...

Q9

Six rights are necessary to purchase one share of Fogel stock at $48. A right sells for a $6. The ex-rights value of Fogel stock is_______.

Q10

Buggy Whip Manufacturing Company is issuing preferred stock yielding 10%. Selten Corporation is considering buying the stock. Assume that Buggy's tax rate is 0% due to continuing heavy tax losses, and Selten's tax rate is 30%. What is the after-tax preferred yield for Selten? Assume the tax rate on dividends is 15%. (Round your answer to 2 decimal places.)

Expert Solution

9.

6 rights X $6 = $36
$36 + $48 Stock = $84
Ex rights value of Fogel stock is $84.

10.

After-tax preferred yield = Before-tax preferred stock yield × [1 − (Tax rate) (Taxable amount of dividends)] =

0.10 × [1 − (0.30) (0.15)] = 9.55%

jeff jeffy answered 2 years ago

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