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Harris Corp. has $250 million in cash and 100 million shares outstanding. Suppose the firms corporate tax rate is 24% and investors pay a 20%
Harris Corp. has $250 million in cash and 100 million shares outstanding. Suppose the firms corporate tax rate is 24% and investors pay a 20% tax on dividends and capital gains and a 35% tax on interest income. Investors had expected Harris to pay out the $250 million through a share repurchase, but Harris instead announces that it will permanently retain the cash and use the interest earned on the cash to pay a regular dividend. If there are no other benefits of retaining the cash, how will Harris stock price change upon this announcement?
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