1. Project Q offers a pre-tax returnof 7% while project Z has a pre-tax rate of return of 11%. At thesame time, income streams from Project Q are tax exempt whileincome from Project Z is taxable at an ordinary tax rate of 24%.(Assume the tax year is 2020).

a. What is the after-tax rate of return for Project Q? What is theafter-tax rate of return for Z?

b. Ignoring your answer to part a., assume the after-tax rate ofreturn for Project Q is 5% and
Project Z is 3%. Which investment should thetaxpayer choose: Q or Z?

Answer rating: 100% (QA)

Project Q offers a pretax return of 7 Project Z has a pretax rate of return of 11 a Af... View the full answer