Amandla Corporation can (1) build a new plant which should generate a before-tax return of 11 percent, or (2) invest the same funds in the preferred shares of FPL, which should provide Amandla with a before-tax return of 9%, all in the form of dividends.Assume that Amandla's marginal tax rate is 25 percent, and that 70 percent of dividends received are excluded from taxable income.If the plant project is divisible into small increments, and if the two investments are equally risky, what combination of these two possibilities will maximise Amandla's effective return on the money invested?

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The Answer of Amandla Corporation can (1) build a new plant which should generate a before-tax return of 11 percent, or (2) invest the same funds in the preferred shares of FPL, which should provide Amandla with a before-tax return of 9%, all in the form of dividends.Assume that Amandla's marginal tax rate is 25 percent, and that 70 percent of dividends received are excluded from taxable income.If the plant project is divisible into small increments, and if the two investments are equally risky, what combination of these two possibilities will maximise Amandla's effective return on the money invested?

Amandla Corporation Can (1) Build a New Plant Which Should