<br/><br/>d'Anconia Copper has $200 million in cash that it can
use for a share repurchase. Suppose instead that d'Anconia Copper invests the funds in an account paying 5% interest for one year. Assume that the corporate tax rate is 21%, the individual capital gains rate is 15% and the individual rate on ordinary income is 32%.
Suppose that d'Anconia Copper retained the $200 million in cash so that it would not need to raise new funds from outside investors for an expansion it has planned for next year. If it did raise new funds, it would have to pay issuance fees. Assuming that these fees can be expensed for corporate tax purposes, the amount that d'Anconia Copper needs to save in issuance fees to make retaining the cash beneficial for its investors is closest to:
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