After completing its capital spending for the year, Carlson Manufacturing has $2,700 extra cash. Carlson’s managers...

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Finance

After completing its capital spending for the year, CarlsonManufacturing has $2,700 extra cash. Carlson’s managers must choosebetween investing the cash in Treasury bonds that yield 4 percentor paying the cash out to investors who would invest in the bondsthemselves.
a. If the corporate tax rate is 22 percent, what personal taxrate would make the investors equally willing to receive thedividend or to let Carlson invest the money? (Do not roundintermediate calculations and enter your answer as a percentrounded to the nearest whole number, e.g., 32.)
b. Is the answer to (a) reasonable? Yes No
c. Suppose the only investment choice is a preferred stock thatyields 7 percent. The corporate dividend exclusion of 50 percentapplies. What personal tax rate will make the stockholdersindifferent to the outcome of Carlson’s dividend decision? (Do notround intermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)
d. Is this a compelling argument for a low dividend-payoutratio? Yes No

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After completing its capital spending for the year, CarlsonManufacturing has $2,700 extra cash. Carlson’s managers must choosebetween investing the cash in Treasury bonds that yield 4 percentor paying the cash out to investors who would invest in the bondsthemselves.a. If the corporate tax rate is 22 percent, what personal taxrate would make the investors equally willing to receive thedividend or to let Carlson invest the money? (Do not roundintermediate calculations and enter your answer as a percentrounded to the nearest whole number, e.g., 32.)b. Is the answer to (a) reasonable? Yes Noc. Suppose the only investment choice is a preferred stock thatyields 7 percent. The corporate dividend exclusion of 50 percentapplies. What personal tax rate will make the stockholdersindifferent to the outcome of Carlson’s dividend decision? (Do notround intermediate calculations and enter your answer as a percentrounded to 2 decimal places, e.g., 32.16.)d. Is this a compelling argument for a low dividend-payoutratio? Yes No