Mr. Hayes plans to pay $100,000 for one of three investment alternatives that have the same risk. The income from investment 1 would be taxed at Mr. Hayes' 24% regular tax rate, the income from investment 2 would be taxed at a 15% preferential rate, and the income from investment 3 is tax-exempt. The investments offer the following before-tax yields.Investment 1: 9.0%Investment 2: 7.5%Investment 3: 6.0%Which investment should Mr. Hayes select?
A. Investment 1
B. Investment 2
C. Investment 3
D. Mr. Hayes is neutral between investment 2 and investment 3.
Answer: A
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