Table 16.2 2010 Canadian Personal Income Tax Rates for a Taxpayer in the Top Tax Bracket 1.

Question:

Table 16.2 2010 Canadian Personal Income Tax Rates for a Taxpayer in the Top Tax Bracket

1. Go to the NASDAQ homepage (www.nasdaq. com), enter the symbol for Amazon (AMZN), and click on "Summary Quotes."
a. Record the current price and the number of shares outstanding.
b. Click on "Financials" and then select "Balance Sheets." Copy and paste the balance sheet information into Excel.
2. Using one-half of the most recent "Cash and Cash Equivalents" reported on the balance sheet (in thousands of dollars), compute the following:
a. The number of shares that would be repurchased given the current market price.
b. The dividend per share that could be paid given the total number of shares outstanding.
3. Go to the Yahoo! Finance website (http:/ / finance. yahoo. com) to obtain the price at which your client purchased the stock on February 28, 2006.
a. Enter the symbol for Amazon and click on "Get Quotes."
b. Click on "Historical Prices," enter the date your client purchased the stock as the start date and the end date, and click on "Get Prices." Record the adjusted closing price.
4. Compute the total cash that would be received by your client with the repurchase and the dividend both before taxes and after taxes (see the tax rates in Table 16.2).
In your role as a consultant at a wealth management firm, you have been assigned a very powerful client who holds one million shares of Amazon.com purchased on February 28, 2006. In researching Amazon, you discovered that the company is holding a large amount of cash, which was surprising because the firm has only relatively recently begun operating at a profit. The client is considering approaching Amazon's board of directors with a plan for half of the cash the firm has accumulated, but can't decide whether a share repurchase or a special dividend would be better. You have been asked to determine which initiative would generate the greater amount of money after taxes, assuming that with a share repurchase your client would keep the same proportion of ownership. Because both dividends and capital gains are taxed at the same rate (15%), your client has assumed that there is no difference between the repurchase and the dividend. To confirm, you need to "run the numbers" for each scenario.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...