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. If KD expects the share price to increase from $20 per share to a new share price on announcement of the transaction and before the shares are repurchased, what will the new share price be after the announcement? Ans.: ______ $/share.

• A. 22.65
• B. 21.40
• C. 22.0
• D. 23.50