In November 2017, voters in Upper Arlington, Ohio went to the polls to vote on the following ballot issue (as taken from the Franklin County Board of Elections 2017 General Certified Issues list") #43

Now, assume a taxpayer with a 28% marginal income tax rate could buy a corporate bond with an identical face value and a coupon rate of 8.25%. Which bond will this taxpayer prefer? Show annual figures (not lifetime) and all work.

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Upper Arlington City School District Proposed Bond Issue and Tax Levy- Additional Bonds-Constructing, furnishing, and equipping a new high school; constructing, furnishing, and equipping new elementary schools; renovating. repairing, improving, furnishing. equipping, and constructing improvements and additions to existing school facilities, buildings, and infrastructure; and replacing existing equipment and constructing various permanent improvements; and constructing and improving various athletic facilities Levy-Current Operating Expenses Bonds- $230,000,000; 6.92 mills, $0.692 per $100 valuation, for 38 years Levy-3.75 mills, $0.375 per $100 valuation, for a continuing period of time, commencing in 2017 Upper Arlington City School District Proposed Bond Issue and Tax Levy- Additional Bonds-Constructing, furnishing, and equipping a new high school; constructing, furnishing, and equipping new elementary schools; renovating. repairing, improving, furnishing. equipping, and constructing improvements and additions to existing school facilities, buildings, and infrastructure; and replacing existing equipment and constructing various permanent improvements; and constructing and improving various athletic facilities Levy-Current Operating Expenses Bonds- $230,000,000; 6.92 mills, $0.692 per $100 valuation, for 38 years Levy-3.75 mills, $0.375 per $100 valuation, for a continuing period of time, commencing in 2017

Answer rating: 100% (QA)

The taxpayer will prefer the corporate bond because it will result in a higher aftertax return The r... View the full answer