ABC Co. has 25 million shares outstanding, trading at $10 per share. ABC plans to lower its corporate taxes by borrowing $100 million permanently and using the pro- ceeds to repurchase shares. ABCs corporate tax rate is 21%. Capital markets are perfect except for the existence of taxes and financial distress costs. Tax shields may be discounted at Rd . If ABCs share price rises to $10.04 immediately after the repurchase announcement, what is the present value of ABCs financial distress costs? 8 / 9