Paxton Storage Systems Is Offering Shareholders a Choice Between a $1.00

question 69

Multiple Choice

Paxton Storage Systems is offering shareholders a choice between a $1.00 dividend or the opportunity to sell the stock back to the company for $20 per share. Dr. Gilbert owns 1000 shares, purchased at $20 per share and wonders if there is any difference between taking the dividend for $1,000 or selling 50 shares at $20 per share. She would have to pay a 15% tax on either capital gains or dividends.

• A) By selling back the 50 shares, whe will avoid taxes, but her remaining shares will be less valuable than if she chose the cash dividend.
• B) She will have the same amount of cash under either alternative.
• C) After taxes, she will have $200 more if she takes the cash dividend.
• D) After taxes, she will have $200 more if she chooses to sell the 50 shares.

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Definitions:

Metabolism

The complex set of chemical reactions within a living organism that are necessary for the maintenance of life, involving energy production and utilization.

Food Restriction

The practice of limiting the amount and/or type of food ingested, often used for weight control or medical reasons.

Obesity

A medical condition involving excess body fat that increases the risk of health problems.

Slow Metabolism

A term describing a lower than average rate at which the body converts calories to energy, affecting weight and energy levels.