How Share Buy-Backs Differ from Dividends: You Purchased 3,000 Shares

question 16

Multiple Choice

How share buy-backs differ from dividends: You purchased 3,000 shares of Space Paranormal Co. four years ago at $40 per share You have just received a mailing from the company announcing a share buy-back at $70 per share. Capital gains are taxed at 20 per cent. If you participate in the buy-back, how much will you receive?

• A) $72,000
• B) $192,000
• C) $186,000
• D) $210,000

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Definitions:

Total Sales

The sum of all revenue generated from the sale of goods or services over a specified period.

Gross Profit

A company's revenue minus its cost of goods sold, indicating how efficiently a company uses its resources in production.

Ending Inventory

The value of all inventory left unsold at the end of an accounting period.

FIFO Method

An inventory valuation method where the first goods purchased or produced are the first ones sold, impacting the cost of goods sold and inventory value.