Allen Corporation Can (1)build a New Plant That Should Generate

question 19

Multiple Choice

Allen Corporation can (1) build a new plant that should generate a before-tax return of 11%,or (2) invest the same funds in the preferred stock of Florida Power & Light (FPL) ,which should provide Allen with a before-tax return of 9%,all in the form of dividends.Assume that Allen's marginal tax rate is 25%,and that 70% 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 maximize Allen's effective return on the money invested?

• A)All in the plant project.
• B)All in FPL preferred stock.
• C)60% in the project; 40% in FPL.
• D)60% in FPL; 40% in the project.
• E)50% in each.

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Definitions:

Attempt Suicide

The act of trying to take one's own life but not resulting in death.

Suicide Education Programs

Suicide prevention programs that take place in schools and concentrate on students and their teachers. There are also a growing number of online sites that provide education about suicide—targeting troubled persons, their family members, and friends.

Previously Attempted Suicide

Refers to an individual who has made one or more attempts to end their own life in the past.

Suicide Study

The scientific investigation into the causes, motivations, and prevention strategies related to suicide.