PPT Slide

• Exxon bonds at 10% vs. California muni bonds at 7%.

• T = Tax rate = 28%.

• After-tax income interest:

Exxon = 0.10($5,000) - 0.10($5,000)(0.28)

= 0.10($5,000)(0.72) = $360.

CAL = 0.07($5,000) - 0 = $350.

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