<sod>Share repurchases also allow companies to covertly distribute their earnings to investors without inflicting them with taxation. For example, if a company were to pay US$100,000 in dividends on one million shares or as 10¢ dividend per share, investors may incur tax upon this disbursement. This means that instead of receiving 10¢ of earnings per share, they receive 8.5¢ (.10×(1&nbsp;−&nbsp;.15)) at a 15% tax rate with 1.5¢ going to the government. An investor with 10 shares will receive 85¢. As the company has to pay out this money the share price drops accordingly, from US$10 to US$9.90, so the investor with 10 shares now has; US$99 + 85¢ dividend, or US$99.85. Of course, the market will not necessarily respond to a dividend payment by selling off shares and reducing share price; while the payment of the dividend technically reduces the company's book value, the ability and willingness to pay a dividend is often seen positively, and the share price may even increase.<eod>
<sod>Share repurchases also allow companies to distribute their earnings to investors without inflicting them with taxation. For example, if a company were to pay US$100,000 in dividends on one million shares or as 10¢ dividend per share, investors may incur tax upon this disbursement. This means that instead of receiving 10¢ of earnings per share, they receive 8.5¢ (.10×(1&nbsp;−&nbsp;.15)) at a 15% tax rate with 1.5¢ going to the government. An investor with 10 shares will receive 85¢. As the company has to pay out this money the share price drops accordingly, from US$10 to US$9.90, so the investor with 10 shares now has; US$99 + 85¢ dividend, or US$99.85. Of course, the market will not necessarily respond to a dividend payment by selling off shares and reducing share price; while the payment of the dividend technically reduces the company's book value, the ability and willingness to pay a dividend is often seen positively, and the share price may even increase.<eod>