How stock repurchases differ from dividends: You purchased 2,500 shares of DotCom.com several years ago for $40 per share. The company is offering a fixed-price tender offer repurchase for $54 per share. What is the amount of after-tax proceeds you would receive from taking part in the repurchase if capital gains are taxed at 15 percent?

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Quizplus · Accepted Answer

The capital gain per share is $54 - $40 = $14. The tax on the gain is 15% of $14, which is $2.10 per share. The after-tax gain per share is $14 - $2.10 = $11.90. The total after-tax proceeds are 2,500 shares * ($40 + $11.90) = $129,750.

How Stock Repurchases Differ from Dividends: You Purchased 2,500 Shares