Use the Information for the Question(s)below

question 93

Multiple Choice

Use the information for the question(s) below.
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 21% and that shareholders expect 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)$10.00.
• B)$10.84.
• C)$8.60.
• D)$11.40.

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Definitions:

Leadership Abilities

Skills and qualities that enable an individual to guide, influence, or direct the performance and progress of a group toward achieving specific objectives.

Exit Strategy

A planned approach for a business owner or investor to exit their investment in a company, typically through selling or transferring ownership.

Merge

The combination of two or more entities into one, often with the goal of synergy or efficiency improvement.

Sell

The act of exchanging a product or service for money or other forms of consideration.