Find the share price after corporate taxes

Assignment Help Corporate Finance

Reference no: EM1346277

Big Blue Banana (BBB) is a clothing retailer with a current share price of $10.00 and with 25 million shares outstanding. Suppose that Big Blue Banana announces plans to lower its corporate taxes by borrowing $100 million and using the proceeds to repurchase shares.

Suppose that BBB pays corporate taxes of 35% and that shareholders expects the change in debt to be permanent. Assuming that capital markets are perfect except for the existence of corporate taxes, the share price for BBB after this announcement is closest to:

A. $8.60
B. $10.00
C. $11.40
D. $10.85

Reference no: EM1346277

Questions Cloud

Explain the forms of shorter reports : Explain the three forms of shorter reports and provide an example of each, saying to whom it is being sent, a brief description of the contents, and why you would choose this format

Elucidate most likely reason the city council in new york : Elucidate the most likely reason the city council in New York City consistently denies licenses to independent van drivers selling rides to the public.

Cultural differences in of effective business : Cultural differences in of effective business dealing with Japanese business people

Describe the impact that the communication process played : Describe a conflict situation you have experienced in the workplace and describe the impact that the communication process played in resolving or escalating the conflict.

Find the share price after corporate taxes : Big Blue Banana is a clothing retailer with a current share price 10$ & with 25 million shares outstanding. Assume that BBB declared plans to lower corporate taxes by using $100 million & the proceeds to repurchase shares.

Analyze your communication skills : Analyze your communication skills and what assessment did you use to analyze your skills? Do you have communication gaps?

Elucidate which is more cost-effective : Elucidate which is more cost-effective. If the salary rate increased to $12 an hour, which would be more cost-effective.

Virtual communication and your own abilities for future : Examine your experience in working with your team for the Team Project on Leadership - what lessons you have learned about virtual communication and your own abilities for future team participation.

What cause an increase in producer surplus : Among which of the following will cause an increase in producer surplus. Which of the following causes a shortage of a good.

User Account

All Pages