William, an employee for Williamson Corporation, receives an annual salary of $120,000 and is in the 28 percent marginal tax bracket. He is eligible to contribute to Williamson’s 401(k) plan and could...

William, an employee for Williamson Corporation, receives an annual salary of $120,000 and is in the 28 percent marginal tax bracket. He is eligible to contribute to Williamson’s 401(k) plan and could contribute the pretax amount of $12,000. Alternatively, he could contribute only $6,000 to the plan and use the remaining $6,000 to purchase municipal bonds paying 6 percent interest. Evaluate the tax savings and after-tax cash-flow effect of each of these investment choices. State which option you recommend for William and explain why.