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:

Need For Cognition

A psychological trait that describes an individual's inclination towards engaging in and enjoying thinking and analytical activities.

Critically And Analytically

Engaging with information or problems in a way that involves careful judgment and the use of logical reasoning.

Persuadability

The quality or characteristic of being easily influenced or convinced by arguments, appeals, or suggestions.

Education And Intelligence

The process of acquiring knowledge, skills, values, and attitudes through study and experiences, and the ability to apply these cognitive skills towards effective problem-solving and adaptation to the environment.