Which distribution form will the average shareholder prefer

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Reference no: EM131933834

Suppose firm A has a share price of 20€ and 110 million shares outstanding. It is considered a payout of 200 million in the form of either a cash dividend or a stock repurchase. Firm's shareholders face a dividend income tax of 15% and a capital gain tax of 20%. The average shareholder bought the stock at 50% below the current price. There are no other frictions. Which distribution form will the average shareholder prefer?

Reference no: EM131933834

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