John Madden is considering two investments of similar risk.

Investment A is a stock that is expected to pay a dividend of $100 at the end of each year for two years, but no dividend in the third year. You expect to sell Investment A after three years for a capital gain of $400.

Investment B is a stock that is not expected to pay any dividends, but you expect to sell the stock at the end of three years for a capital gain of $600.

John is wealthy and is in the 50% tax bracket. Dividends are taxed at the personal tax rate, but capital gains are taxed at 40% of the personal tax rate.

Given a discount rate of 10% for both investments, which would you recommend?

Please show work!