Question
KD Industries has 30 million shares outstanding with a market price of $20 per share and no debt. It has had consistently stable earnings, and
KD Industries has 30 million shares outstanding with a market price of $20 per share and no debt. It has had consistently stable earnings, and pays a 35% tax rate. Its management plans to borrow $200 million on a permanent basis through a leveraged recapitalization in which they would use the borrowed funds to repurchase outstanding shares.
- What is the value of KD's unlevered equity?
- What is the preset value of KD's interest tax shield?
- After the recapitalization, what is the total value of KD as a levered firm?
- After the recapitalization, what is the value of KD's levered equity?
- After the recapitalization, what is value of each share of KD's stock?
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Introduction to Finance Markets Investments and Financial Management
Authors: Melicher Ronald, Norton Edgar
15th edition
9781118800720, 1118492676, 1118800729, 978-1118492673
