$9.$ Find the after$-$tax return to a corporation that buys a share of preferred stock at $$40,$ sells it at year$-$end at $$40,$ and receives a $$4$ year$-$end dividend. The firm is in the $21\%$ tax bracket.

$$ Answer:

The after$-$tax return is calculated as follows:

$$ Dividend received $=$ $$4$

$$ Tax on dividend $=$ $$4\backslash$times $21\%=$ $$0\mathrm{.}84$

$$ After$-$tax dividend $=$ $$4-$ $$0\mathrm{.}84=$ $$3\mathrm{.}16$

$$ Return $=$ After$-$tax dividend $-$: Purchase price $=$ $$3\mathrm{.}16-$: $$40=0\mathrm{.}079$ or $7\mathrm{.}9\%$