Compare the after-tax returns for a corporation that invests in preferred stock with a 12% dividend yield versus a common stock with no dividend but a 16% capital gain. The corporation's tax rate is 21%. The:

Multiple Choice

• preferred stock returns 1.90% less than the common.

• returns are equal on an after-tax basis.

• common stock returns 2.32% less than the preferred.

• common stock returns 2.60% less than the preferred.