Steve owns 3,000 shares of NOP, Inc. stock which he purchased six years ago at a

Question

Steve owns 3,000 shares of NOP, Inc. stock which he purchased six years ago at a price of $22 a share. Today, these shares are selling for $68 each. Assume the current tax laws are such that Steve is subject to a tax rate of 25 percent on both his dividend income and his capital gains. From Steve's point of view, a stock repurchase today: (Ignore costs)

A. is equivalent to a cash dividend in all respects.
B. is more desirable than a cash dividend in respect to taxes.
C. will result in the same tax liability as an equivalent cash dividend.
D. is more highly taxed than a cash dividend.
E. is totally unacceptable to him.

Explanation / Answer

c. is more desirable than a cash dividend in respect to taxes.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.