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KDIndustriesisan all equity firm thathas 30 million shares outstanding with a market price of $20 per share. KD has had consistently stable earnings and pays

KDIndustriesisan all equity firm thathas 30 million shares outstanding with a market price of $20 per share. KD has had consistently stable earnings and pays a 35% tax rate.Managementplans to borrow $200 million on apermanentbasis, they would use the borrowed funds to repurchaseoutstandingshares.

(a)Whatis the current value of KD'sequity (rounded to thenearest $1M)?

(b)What is the present value of KD'sinterest tax shield on the planned borrowings?

(c)After recapitalization, what is the value of a share of KD'sstock?

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