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Manny Mota is currently considering investing in a high dividend yield stock with no growth
potential that pays a 6% dividend yield. His tax rate is 30% and the tax rate on dividends is
15%. What is his after-tax rate of return on this investment (round to one decimal place;
e.g., 7.5%) ?

Respuesta :

The after-tax return on investment in high yield dividend stock comes out to be 7.05%.

What are the dividends?

Dividends are the amounts allocated by companies to their share investors up to the shares owned by them.

Given values:

Dividend yield: 6%

Tax on dividends: 15%

Computation of after-tax return on investment:

[tex]\rm\ After-\rm\ tax \rm\ return=\frac{\rm\ Dividend \rm\ yield}{1-\rm\ Tax \rm\ Rate} \\\rm\ After-\rm\ tax \rm\ return=\frac{0.06}{1-0.15} \\\rm\ After-\rm\ tax \rm\ return=7.05\%[/tex]

Therefore, the rate of return on dividends after taxes is 7.05%.

Learn more about the dividends in the related link:

https://brainly.com/question/13535979

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