You purchased 3,000 shares of Purple Stuff Beverage Co. four years ago at $30 per share. You have just received a mailing from the company announcing a fixed-price tender offer stock repurchase at $36 per share. Capital gains are taxed at 15 percent. If you participate in the repurchase, how much will you receive?

Question

Quizplus · Accepted Answer

You will receive $108,000 from the repurchase (3,000 shares x $36). The capital gain is $18,000 (3,000 shares x ($36 - $30)), and after a 15% tax, you pay $2,700 in taxes. Thus, you receive $108,000 - $2,700 = $105,300.

You Purchased 3,000 Shares of Purple Stuff Beverage Co