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

Hawar International is a shipping firm with a current share price of $5.50 and 10 million shares

outstanding. Suppose Hawar announces plans to lower its corporate taxes by borrowing $20

million and repurchasing shares.

Suppose that Hawar pays a corporate tax rate of 30%, and that shareholders expect the change

If the only imperfection is corporate taxes, what will the share price be after this

announcement?

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