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Assume that you are evaluating several investments, including the stock of a mature company that pays annual dividends of $2.99 and is currently trading at
Assume that you are evaluating several investments, including the stock of a mature company that pays annual dividends of $2.99 and is currently trading at $30. Another investment is a trust preferred stock that pays $3.39 in annual dividends and is also trading at $30. Given that you do not expect the price of either stock to change, which investment will provide a higher dollar return if your ordinary income is taxed at a marginal rate of 32% and your qualified dividend income is taxed at a 15% rate. The after-tax dollar return from the common stock is $ . (Round to the nearest cent.) The after-tax dollar return from the trust preferred stock is $ . (Round to the nearest cent.) Which investment will provide a higher dollar return? (Select the best answer below.) O A. Trust preferred stock. O B. Common stock
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