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:

Ethical Problem

A situation where a person is faced with a dilemma involving moral principles or practice.

Criminal Justice

The system of practices and institutions aimed at upholding social control, deterring and mitigating crime, and sanctioning those who violate laws.

Public Policy

Governmental guidelines, principles, and actions adopted to solve societal problems, achieve certain goals, and impact the public's welfare.

Ethical Dilemma

A situation in which a person is forced to choose between two morally right or two morally wrong actions, with no clear resolution that satisfies all ethical considerations.