Hawar international is a shipping firm with a current share price of $ 4.95 and 9.2 million shares outstanding. suppose that hawar announces plans to lower its corporate taxes by borrowing $ 19.3 million and repurchasing shares, that hawar pays a corporate tax rate of 30 %, and that shareholders expect the change in debt to be permanent. a. if the only imperfection is corporate taxes, what will be the share price after this announcement? b. suppose the only imperfections are corporate taxes and financial distress costs. if the share price rises to $ 5.20 after this announcement, what is the pv of financial distress costs hawar will incur as the result of this new debt?

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answer; at prices that violate government price regulations;

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.