After completing its capital spending for the year, CarlsonManufacturing has $2,300 extra cash. Carlson’s managers must choosebetween investing the cash in Treasury bonds that yield 3 percentor paying the cash out to investors who would invest in the bondsthemselves. a. If the corporate tax rate is 23 percent, whatpersonal tax rate would make the investors equally willing toreceive the dividend or to let Carlson invest the money? Supposethe only investment choice is a preferred stock that yields 7percent. The corporate dividend exclusion of 50 percent applies.What personal tax rate will make the stockholders indifferent tothe outcome of Carlson’s dividend decision?
