The Kudos Company (TKC) is in the spaceship industry. Annual EBIT is projected to remain level at $50 million and is received at the end of each year. There are 4 million shares outstanding at a market price of $35 each; there is no debt. TKC is considering approval of a shareholder value plan under which $60 million would be borrowed in perpetuity and then immediately paid out to shareholders as a dividend. This debt bears an interest rate of 8%. TKC has no depreciable assets. The corporate tax rate is 30%; and there are no personal taxes. Markets are frictionless and semistrong efficient.

(a) Calculate the market price per TKC share just after the :

(i) approval of the plan before the public announcement.

(ii) public announcement of the plan.

(iii) implementation of the plan after the dividend is paid out.

(b) Calculate rWACC for TKC after the implementation of the shareholder value plan.