KD Industries has 30 million shares outstanding with a market price of $20 per share and no debt. KD has had consistently stable earnings and pays a 21% tax rate. 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.

(a) If KD can repurchase its existing shares at $20 per share, what will the new share price (of remaining shares) be after the transaction?

(b) Would KDs shareholders be interested in tendering their shares at $20 per share? Explain.

(c) If your answer to b) is no find the minimal share price at which KDs shareholders be willing to sell their shares. Provide computations.