Use the Information for the Question(s)below

question 83

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.
-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?

• A)$21.40
• B)$22.65
• C)$22.00
• D)$23.50

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