Problem:
Van Dyke Corporation has a corporate tax rate equal to 36%. The company recently purchased preferred stock in another company. The preferred stock has an 8% before-tax yield.
Required:
Question: What is Van Dyke's after-tax yield on the preferred stock?
Choose one:
a. 5.78%
b. 7.14%
c. 5.92%
d. 6.78%
e. 8.49%
Note: Provide support for rationale.