Use the Information for the Question(s)below

question 79

Multiple Choice

Use the information for the question(s) below.
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.
-The present value of KD's interest tax shield is closest to:

• A)$130 million.
• B)$200 million.
• C)$400 million.
• D)$42 million.

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Definitions:

Interval Variables

Variables which not only have an order but also a precise numerical distance between their values, similar to interval data but in a context emphasizing variable types.

Normal Distributions

This probability distribution is defined by its symmetrical structure around the mean, revealing that data points closer to the mean have greater frequencies than those positioned further away.

Wilcoxon Rank

A non-parametric statistical test that compares two paired groups, based on ranking the differences between pairs and used when the data does not necessarily conform to a normal distribution.

Null Hypothesis

A hypothesis that assumes no significant difference or effect, serving as a default position until evidence indicates otherwise.