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Solarcell Corporation has $20,000 that it plans to invest in marketable securities. It is choosing between AT&T bonds that yield 10.00%, State of Florida municipal bonds that yield 7.00%, and AT&T preferred stock with a dividend yield of 8.50%. Solarcell's corporate tax rate is 25%, and 50% of the preferred stock dividends it receives are tax exempt. Assuming that the investments are equally risky and that Solarcell chooses strictly on the basis of after-tax returns, which security should be selected? Answer by giving the after-tax rate of return on the highest yielding security a. 5,38% b. 7.5056 7.0096 d. 8.7596 ex 7.44% Beranek Corp has $855,000 of assets (which equal total invested capital), and it uses no debt-it is financed only with common equity. The new CFO wants to employ enough debt to raise the total debt to total capital ratio to 40%, using the proceeds from borrowing to buy back common stock at its book value. How much must the firm borrow to achieve the target debt ratio? O a: 5513,000 b. $1,197,000 C. 5610,714 d. 5342,000 e: 5171,000 The CFO of Daves Industries plans to have the company issue $300 million of new common stock and use the proceeds to pay off some of the company's outstanding bonds that carry a 7% interest rate. Assume that the company, which does not pay any dividends, takes this action, and that total assets, operating income (EBIT), and tax rate all remain constant. Which of the following would occur? a. The company would have to pay less taxes, b. The company's net income would increase c. The company would have less common equity than before d. The company's taxable income would fall. O c. The company's interest expense would remain constant

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