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Assume that Lucas's marginal tax rate is 32 percent and his tax rate on dividends...

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Accounting

Assume that Lucas's marginal tax rate is 32 percent and his tax rate on dividends is 16 percent. If a dividend-paying stock (with no growth potential) pays an 6.8 percent dividend yield, what interest rate would a municipal bond have to offer for Lucas to be indifferent between the two investments from a cash-flow perspective?

Multiple Choice

32.00 percent

15.00 percent

6.80 percent

5.71 percent

None of the choices are correct.

Answer & Explanation Solved by verified expert
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