CMA Study Group

Hi All,

Can someone advise on how to approach this question?

Correct Answer is B- $3,600,000 higher

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Sumaya M

Bahrain
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				Div / Share	No of Share	Amount Paid as Divident
		Dividend Paid		$8	2,000,000.00	16,000,000.00
		Tax paid on Divident
		Tax %		30%
		Tax on Dividend			4,800,000.00
	if	Cash used to repursase
		Current Market Price			$80
		Amount Sale Proceeds			16,000,000.00
		No of Share repurchased			200,000.00
		Capital gain
	if
		if repurchase on $ 50
		No of Share			200,000.00
		Diff With Current Share Price			30
		Capital Gain			6,000,000.00
		Tax on Capital Gain			20%
		Tax on capital Gain			1,200,000.00
		Tax Differenc
		if paid as div			4,800,000.00
		if Repurchased			1,200,000.00
					3,600,000.00

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KRISHNAKUMAR S
Accountant
GALFAR ENGINEERING AND CONTRACTING W.L.
Thiruvanathapuram
India
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