S. Townsend Incorporated is considering two equally risky investments: 1. A $25,000 investment in a municipal...

S. Townsend Incorporated is considering two equally risky investments:

1. A $25,000 investment in a municipal bond that yields 5.65 percent

2. A $125,000 investment in a preferred stock that yields 6.1 percent

What is the break-even corporate tax rate that makes the company indifferent between the two investments

Expert Solution

Note: The Interest earned from the bond shall be avaliable for deduction for tax purposes. So, interest is free from tax

jeff jeffy answered 2 years ago

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