How stock repurchases differ from dividends: 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

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The correct answer is C. $105,300. The total amount received from the repurchase is $36 per share x 3,000 shares = $108,000. However, since capital gains are taxed at 15%, the net amount received after taxes is $108,000 - (0.15 x $108,000) = $105,300.

How Stock Repurchases Differ from Dividends: You Purchased 3,000 Shares