Answered step by step
Verified Expert Solution
Question
1 Approved Answer
[ 10 pts Inky Inc. does not have any positive NPV projects and holds $750,000 in excess cash that it intends to return to shareholders.
[ 10 pts Inky Inc. does not have any positive NPV projects and holds $750,000 in excess cash that it intends to return to shareholders. Investors have income tax rates of 25% and capital gains tax rates of 35%. Why might investors prefer that Inky repurchase shares of stock with the $750,000 rather than paying a dividend? Investors want the company to hold on to its cash The capital gains tax rate is lower on a stock repurchase O Investors would prefer to have more shares outstanding Investors can choose whether or not to participate in the repurchase
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started