Answered step by step
Verified Expert Solution
Link Copied!

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

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Technical Analysis Of Stock Trends

Authors: Robert D. Edwards, John Magee, W.H.C. Bassetti

8th Edition

0814406807, 978-0814406809

More Books

Students also viewed these Finance questions