1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
kondaur [170]
3 years ago
9

Hawar International is a shipping firm with a current share price of $5.50 and 10 million shares outstanding. Suppose Hawar anno

unces 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 tax rate of 30%, 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?
Business
1 answer:
Vika [28.1K]3 years ago
3 0

Answer: a. $5.50

b. $6.1

c. $3,500,000

Explanation:

a. From the question, we are informed that Hawar International is a shipping firm with a current share price of $5.50 and 10 million shares outstanding and that Hawar announces plans to lower its corporate taxes by borrowing $20 million and repurchasing shares.

We are informed that Hawar announces plans to lower its corporate taxes by borrowing $20 million and repurchasing shares. This is a transaction and therefore, the value if the share won't be changed. So, the value for the share will still be $5.50.

b. If the only imperfection is corporate tax rate of 30%, the share price after this announcement will be:

= [30% × (20million/10million)] + $5.50

= [0.3 × 2] + $5.50

= $0.6 + $5.50

= $6.1

Therefore, the share price be after this announcement will be $6.1.

c. 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:

= ($6.1 - $5.75) × 10,000,000

= $0.35 × 10,000,000

= $3,500,000

You might be interested in
Select the correct answer. What is a SWoT analysis?
Ipatiy [6.2K]

Answer:

B

Explanation:

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis (or SWOT matrix) is a strategic planning technique used to help a person or organization identify strengths, weaknesses, opportunities, and threats related to business competition or project planning.

5 0
3 years ago
Interest rates on 4-year Treasury securities are currently 6.05%, while 6-year Treasury securities yield 7.6%. If the pure expec
a_sh-v [17]

Answer:

2 year yield 4 years from now 37.99%

Explanation:

given data

Interest rates r1 = 6.05% = 0.0605

Interest rates r2 = 7.6% = 0.0760

to find out

2 year  yielding 4 years from now

solution

we find here  2 year securities will be yielding 4 years from now by as

2 year yield 4 years from now = \frac{(1+r2)^{t2}}{[(1+r1)^{t1}]^{0.5}} - 1

put here value we get

2 year yield 4 years from now = \frac{(1+0.0760)^6}{[(1+0.0605)^4]^{0.5}} - 1

2 year yield 4 years from now = 1.379915 - 1

2 year yield 4 years from now = .379915

so 2 year yield 4 years from now 37.99%

5 0
3 years ago
Target's liabilities exceed owners' equity.<br> a) true<br> b) false
Likurg_2 [28]

Answer: True

Explanation:

As of February 2020, Target Corp's total liabilities were listed to be $30,946,000,000 while its shareholder equity was significantly lower at $11,833,000,000.

Target Corp therefore does indeed have liabilities that exceed owners equity and by a substantial amount. This has also been the trend since at least 2015.

4 0
3 years ago
Rachel plans to set up a beautifully furnished office for her interior decorating business. She will describe it in her business
Whitepunk [10]
The answer to this question is B
5 0
3 years ago
Read 2 more answers
PLEASE HELP. QUESTIONS AT THE BOTTOM, TOP PART IS SOME LORE PER SAY.
deff fn [24]

Answer:

Explanation:

Question 1: Checkerz

If you're recreating the same type of biscuit/ cookie as Oreo's  then checkerz would make sense as the pattern of the biscuit ( aka black, white, black) reminds potential buyers of the classic game of checkers.

sweet'n'fusions (as the cream filling is fused between the two biscuits)

cream bites

raven munchers (as the two outer biscuits are dark like ravens)

gogo's (to get you energised and ready to go)

Question 2

- bright colours such as pink and electric blue to draw initial attention

- abnormal packaging shape such as hexagon to set it apart from other companies

- label clearly as vegan/ veg to draw more customers

Question 3

instead of having just the biscuit on its own, instead take the idea of reeces peanut butter cups but make the cup out of chocolate fudge brownie the peanut butter replaced by the Oreo

A brand extension in this case would not be a good idea considering many people associated Hydrox with cleaning supplies, many people who hear about the brand maybe put off by the subconscious thoughts of consuming cleaning products

I hope that was helpful to you and contained everything you wanted, i'll be more than happy to edit the answer if you think i left something out :)

7 0
3 years ago
Other questions:
  • What is a mortgage?
    8·1 answer
  • Which of the following is true if the production volume​ decreases? A. average cost per unit decreases B. fixed cost per unit in
    13·1 answer
  • A debit card is also know a(n)________
    15·1 answer
  • Clay's fishing shop's beginning inventory is $70,000 and ending inventory is $36,500. what was clay's average inventory?
    11·1 answer
  • The U.S. Bureau of Land Management sets a fee for ranchers who graze their animals on public land. The fee is equal to $1.43 per
    8·1 answer
  • Each piece of stock that you own in a company is called a what?
    13·1 answer
  • Honi is not a resident of Iowa although her website can be accessed by residents of that state. Jean files a suit against Honi i
    8·1 answer
  • Money Matters Help
    9·1 answer
  • Extended warranties
    10·1 answer
  • The following computer printout was generated, using regression, for use in estimating overhead costs.
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!