Steve Owns 3,000 Shares of NOP,Inc

question 77

Multiple Choice

Steve owns 3,000 shares of NOP,Inc.stock,which he purchased six years ago at a price of $22 a share.Today,these shares are selling for $68 each.Assume the current tax laws are such that Steve is subject to a tax rate of 25 percent on both his dividend income and his capital gains.From Steve's point of view,a stock repurchase today: (Ignore costs)

• A)is equivalent to a cash dividend in all respects.
• B)is more desirable than a cash dividend in respect to taxes.
• C)will result in the same tax liability as an equivalent cash dividend.
• D)is more highly taxed than a cash dividend.
• E)is totally unacceptable to him.

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