Hawar International is a shipping firm with a current share price of $5.50 and 5 million shares outstanding. Suppose Hawar announces plans to lower its corporate taxes by borrowing $10 million and repurchasing shares.

a. With perfect capitalmarkets, what will the share price be after thisannouncement?

With perfect capitalmarkets, the share price will be $.............per share. (Round to the nearestcent.)

b. Suppose that Hawar pays a corporate tax rate of 40%, and that shareholders expect the change in debt to be permanent. If the only imperfection is corporatetaxes, what will the share price be after thisannouncement?

If the only imperfection is corporatetaxes, the share price will be $................ per share. (Round to the nearestcent.)

c. Suppose the only imperfections are corporate taxes and financial distress costs. If the share price rises to $ 5.95

$5.95 after thisannouncement, what is the PV of financial distress costs Hawar will incur as the result of this newdebt?

If the share price rises to $5.95 after thisannouncement, the PV of financial distress costs Hawar will incur as the result of this new debt will be $............

million. (Round to two decimalplaces.)