Use the Information for the Question(s)below

question 34

Essay

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 40% and that shareholders expects the change in debt to be permanent.Assume that capital markets are perfect except for the existence of corporate taxes and financial distress costs.If the price of BBB's stock rises to $10.80 per share following the announcement,then the present value of BBB's financial distress costs is closest to:

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Definitions:

ISS

An abbreviation for the International Space Station, a large spacecraft in orbit around Earth serving as a home and research laboratory for astronauts.

Outsourcing

A business strategy where certain job functions or processes are contracted out to a third party.

HRIS

Human Resources Information System, a digital solution for managing and automating many HR tasks from payroll to employee performance monitoring.

Intelligence System

A computer-based system that collects, analyzes, and presents information to aid in decision-making and strategic planning.