You have just inherited $50,000 and have decided to buy shares. You have narrowed your choice down to QT Logistics Inc. and Next Systems Ltd. You carefully read each company's annual report to determine which company's shares you should buy. Your research indicates that the two companies are very similar. QT Logistics Inc.'s annual report states "The Company has financed its growth through long- and short-term borrowing," while the Next report contains the statement "The Company has financed its growth out of earnings retained in the business."
QT's shares are trading at $25.00 while Next's shares are trading at $13.00. You wonder if that is because QT has been paying an annual dividend of $2.00 per share while Next has been paying a dividend of $1.10.
You recall that the morning newspaper had an article about the economy that predicted that interest rates were expected to rise and stay at a much higher rate than at present for the next two to three years.
Required
Explain which shares you would buy and indicate why you have selected them.