Mrs. James plans to invest in one of two investment alternatives having the same risk.Investment 1 has a before-tax return of 10% and the income from investment 1 would betaxed at Mrs. James's 35% regular tax rate. Investment 2 has a before-tax return of 8% and theincome from investment 2 would be taxed at a 15% preferential rate. Which of the followingstatements regarding these investment choices is false?

A.The after-tax rate of return on investment 1 is 6.5%.

B.The after-tax rate of return on investment 2 is 6.8%.

C.Investment 2 bears implicit tax relative to investment 1.

D.Mrs. James should choose investment 1.

Answer rating: 100% (QA)

Return on investment 1 10 135 65 ... View the full answer