Please see the attached file.

Corporate After Tax Yield
1. The Shrieves Corporation has $10,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 7.5 percent, state of Florida muni bonds, which yields 5 percent, and AT&T preferred stock, with a dividend yield of 6 percent. Shrieves's corporate tax rate is 35 percent, and 70 percent of the dividends received are tax exempt. Assuming that the investments are equally risky and that Shrieves chooses strictly on the basis of after-tax returns, which security should be selected? What is the after-tax rate of return on the highest-yielding security?

Computation of after tax rate of return

1) AT&T Bonds
It is assumed to be fully taxable thus
Post tax rate of return= Pretax rate of return*(1-Tax rate)
= .075 *(1-.35) = .04875= 4.875%

2) Municipal Bonds=

Pretax Rate of return = Post tax rate of return (as they are tax free)
Thus it is having 5%

3) AT&T preferred Stock
70% of Dividends are tax exempt, thus 70% of 6% is tax exempt which is 4.2%

The Balance 30% of 6% will be taxable = 1.8% will be taxed at 35% tax

Thus post tax return= .018*(1-.35) = .0063 or .63%

Thus total yield= 4.2%+.63%= 4.83%

Thus the highest yielding security is Municipal Bonds of 5%

Cash Flow
2. The Klaven Corporation has operating income (EBIT) OF $750,000. The company's depreciation expense is $200,000. Klaven is 100 percent equity financed, and it faces a 40 percent tax rate. What is the company's cash flow?

Computation of Cash Flows:
in $
EBIT= 750000 (Assuming Depreciation is already deducted)
Less Interest 0 (As 100% equity financing is there, thus there is no debt and interest)
EBT 750000
Less Taxes@40% 300000
Net Income 450000
Add Depreciation 200000
Cash Flow after taxes 650000