answer.
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]
2 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]2 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
Maria Peron's company treats the world, including the home market in Spain, as one market. Market segmentation decisions no long
Veseljchak [2.6K]

Answer:

The correct answer is letter "E": Global marketing.

Explanation:

Global marketing refers to all the efforts a company males to promote its goods or services across its original borders. It allows firms to widen their possibilities of making more profits and reduces the risk of relying on domestic consumption only. Businesses with global marketing view tend to adapt their products to the different regions of operations or provide the most standardized version of their original good.

5 0
2 years ago
Excavation, Inc., uses explosives to prepare land for construction projects. Strict liability is imposed on this activity becaus
Delvig [45]

Excavation, Inc., uses explosives to prepare land for construction projects. Strict liability is imposed on this activity because The activity is extremely risky

<h3>Option (C) is correct.</h3>

<u>Explanation:</u>

Excavation activity is an extremely risky activity. This activity has many accidents associated with it. every year many people die or get injured in accidents related to excavation. So due to the high risk associated with this strict liability is imposed on this activity.

Risks associated with excavation are explosion, gas escape, flooding, etc. Other dangers like hazardous atmospheres, the possibility of fatal accidents, Falling loads can also be there. These dangers are sudden and fail to give time to workers to escape. So before undertaking such activity permission must be obtained from the government.

7 0
1 year ago
Brian declares bankruptcy. What benefits can he obtain by declaring bankruptcy? Brian declares bankruptcy, which triggers a(n) _
Varvara68 [4.7K]
Declaring a bankruptcy will trigger automatic stay. This is a condition in which all lawsuit will be stopped as well as the collection activity against the debtor. This blocks the creditors from reacquiring all the items such as cars, etc. It also blocks creditors from suing you and sending you letters asking for payments. 
3 0
2 years ago
Read 2 more answers
Answer the following question based on the article "The Mystery of Original Sin: We Don't Know Why God Permitted the Fall, but W
Alexandra [31]

Answer:

D) He wants us to learn that having Him at the center of our lives will always be the best for us no matter how big or small the decisions we must face.

Explanation:

The article exposes that dehumanization is part of the world we're living in today. Marguerite Shuster argues that the world we're living in today is Genesis 3 world.

What's wrong with this world? "As the story goes, Chesterton responded with just two words: "I am." His answer is unlikely to be popular with a generation schooled to cultivate self-esteem, to pursue its passions and chase self-fulfillment first and foremost."

Then Shuster's invitation is to recenter our lives at Him.

References:

Shuster , M. (2013). The Mystery of Original Sin: We don’t know why God permitted the Fall, but we know all too well the evil and sin that still plague us. Christianity Today, 57(3), 38-41

Shuster, Marguerite. “Did God Plan the Fall?” ChristianityToday.com, Christianity Today, 24 Sept. 2018

8 0
1 year ago
Tom is responsible for ordering hardware for a custom home his company is building. The contractor installing the hardware is sc
ICE Princess25 [194]

Answer:

Free slack.

Explanation:

In project management, free slack refers to the amount of time that a certain task can be delayed and not affect the completion time of the general project. Slack time can be considered "just in case" time, because even though delays should be minimized, rarely you can eliminate them completely, and slack time gives you a little extra room for managing projects.

In this case, the free slack time is 10 days, and this delay will consume 9 of them.

3 0
2 years ago
Other questions:
  • Cragmont has beginning equity of $277,000, net income of $63,000, withdrawals of $25,000 and no additional investments by owners
    8·1 answer
  • There are 45 potential workers in this economy. How many people are unemployed?
    7·1 answer
  • If _________ is constrained, we should __________ the staffing level to lower capacity.
    8·1 answer
  • What other aspects of Ecuadorian culture, other than its predominant religion and language, might affect that country’s culture?
    8·1 answer
  • According to the law of comparative advantage, what should be the distinguishing characteristics of the goods a nation imports?
    9·1 answer
  • Rune Co.’s checkbook balance on December 31 was $10,000. On that date, Rune held the following items in its safe: $4,000 check p
    11·2 answers
  • Nathanial’s company developed a new machine that could sort through a stock of produced goods to identify defective ones. His co
    12·1 answer
  • To raise operating funds, National Distribution Center sold its office building to an insurance company on January 1, 2018, for
    8·1 answer
  • DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company
    7·1 answer
  • The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $97,456. The bank statement indicated a balance o
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!