5. Numerical problem II (15p) Suppose there are 100 shares outstanding. The tax rate on investment income is 25.65% (Federal tax 15%, Obamacare 3.8%, New York State tax 6.86%). (a) If the dividend is $2 per share, what is the total payout and what is the combined tax liability of all shareholders on the dividend payout? (b) As an alternative, the company considers a share repurchase of 10 shares at a price of $20 per share. If the average shareholder basis is $10 per share, what is the total payout and what is the combined tax liability of all shareholders on the share repurchase? (c) How do you explain the difference in tax liability between dividends and share re- purchase? 5. Numerical problem II (15p) Suppose there are 100 shares outstanding. The tax rate on investment income is 25.65% (Federal tax 15%, Obamacare 3.8%, New York State tax 6.86%). (a) If the dividend is $2 per share, what is the total payout and what is the combined tax liability of all shareholders on the dividend payout? (b) As an alternative, the company considers a share repurchase of 10 shares at a price of $20 per share. If the average shareholder basis is $10 per share, what is the total payout and what is the combined tax liability of all shareholders on the share repurchase? (c) How do you explain the difference in tax liability between dividends and share re- purchase

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