Sarah just bought 100 shares of Hewlett Packard for $20 per share. Soon after, HP announced...
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Sarah just bought 100 shares of Hewlett Packard for $20 per share. Soon after, HP announced a tender offer to acquire 10% of shares outstanding at a price of $20 per share. Assume that Sarah sells 10% of her shares to the company through the tender offer and then sells the remainder on the market at $20. What is her after-tax change in wealth? Assume that nothing else happens to change the stock price (other than the repurchase), that her tax rate on capital gains is 15%, and her tax rate on dividends is also 15%. Assume that she has other capital gains against which she can use a capital loss. Sarah just bought 100 shares of Hewlett Packard for $20 per share. Soon after, HP announced a tender offer to acquire 10% of shares outstanding at a price of $20 per share. Assume that Sarah sells 10% of her shares to the company through the tender offer and then sells the remainder on the market at $20. What is her after-tax change in wealth? Assume that nothing else happens to change the stock price (other than the repurchase), that her tax rate on capital gains is 15%, and her tax rate on dividends is also 15%. Assume that she has other capital gains against which she can use a capital loss.
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Since Sarah is selling 10 of her shares back to HP she sells 10 shares back to the company at 20 per ... View the full answer
Related Book For
Personal Finance
ISBN: 978-0077861643
11th edition
Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes
Posted Date:
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