Aftertax comparison of preferred stock and other investments [LO17-5] The Omega Corporation has some excess cash it would like to invest in marketable securities for a long-term hold, Its Vice-President of Finance is considering three investments: (a) Treasury bonds at a 8 percent yield; (b) corporate bonds at a 11 percent yield; or (c) preferred stock at an 9 percent yield. Omega Corporation is in a 30 percent tax bracket and the tax rate on dividends is 15 percent. 8-1. Compute the aftertax yields for the three investment options. (Do not round Intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Aftertax yields a. Treasury bonds b Corporate bonds % % c. Preferred stock A a-2. Which one of the three investments should she select based on the aftertax yields? O Preferred stock O Treasury bonds Corporate bond
