Corporate Finance
Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Chapter 17.4, Problem 1CC
Summary Introduction

To discuss: The condition where the shareholders prefer shares repurchase rather than dividends.

Introduction:

Share repurchase is an alternative method to pay the cash to the company’s investors through a way of buy back of shares or shares repurchase and distribution of portion of earnings by the company to its shareholders is termed as dividends.

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Would would an investor prefer to receive a distribution as a dividend?     Answers: Lower tax rate on dividends than capital gains   Higher tax rate on dividends than capital gains   Greater certainity   Greater uncertainity
Would would an investor prefer to receive a distribution as a repurchase (capital gain)?     Answers: Lower tax rate on dividends than capital gains   Higher tax rate on dividends than capital gains   Greater certainity   Greater uncertainity
How are share repurchases an alternative to dividends, and why might investors prefer them?

Chapter 17 Solutions

Corporate Finance

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