Hawar International is a shipping firm with a current share price of $5.50 and 10 million shares outstanding. Suppose Hawar announces plans to lower its corporate taxes by borrowing $20 million and repurchasing shares.
a. With perfect capital? markets, what will the share price be after this? announcement?
Suppose that Hawar pays a corporate tax rate of 30%?, and that shareholders expect the change in debt to be permanent.
b. If the only imperfection is corporate? taxes, what will the share price be after this? announcement?
c. Suppose the only imperfections are corporate taxes and financial distress costs. If the share price rises to $5.75 after this? announcement, what is the PV of financial distress costs Hawar will incur as the result of this new? debt?
a. With perfect capital? markets, what will the share price be after this? announcement? With perfect capital? markets, the share price will be $______ per share. ? (Round to the nearest? cent.)
Suppose that Hawar pays a corporate tax rate of 30%?, and that shareholders expect the change in debt to be permanent.
b. If the only imperfection is corporate? taxes, what will the share price be after this? announcement?
If the only imperfection is corporate? taxes, the share price will be $______ per share. ?(Round to the nearest? cent.)
c. Suppose the only imperfections are corporate taxes and financial distress costs. If the share price rises to $5.75 after this? announcement, what is the PV of financial distress costs Hawar will incur as the result of this new? debt?
If the share price rises to $5.75 after this? announcement, the PV of financial distress costs Hawar will incur as the result of this new debt will be $____ million. ?(Round to two decimal? places.)