Question 1. An investor recently purchased a corporate bond which yields 9 percent. The investor is in the 36 percent combined federal and state tax bracket. What is the bond's after-tax yield?
Question 2. Corporate bond issued by Johnson Corporation currently yield 8 percent. Municipal bonds of equal risk currently yield 6 percent. At what tax rate would an investor be indifferent between these two bonds?
Question 3. The Talley Corporation had a taxable income of $365,000 for operations after all operating cost but before
(1) interest charges of $50,000,
(2) dividends received of $15,000,
(3) dividend paid of $25,000, and
(4) income taxes. What is the firm's income tax liability and its after-tax income?
What are the company's marginal and average tax rates on taxable income?