Use the Information for the Question(s)below

question 28

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.
-After the recapitalization,the total value of KD as a levered firm is closest to:

• A)$470 million.
• B)$730 million.
• C)$642 million.
• D)$530 million.

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Definitions:

F-test

A statistical test used to compare the variances of two populations and determine if they are equal.

Population Means

The average value of a characteristic in a population, representing the central tendency.

F-test

An F-test is a statistical test used to compare the variances of two populations and is based on the F-distribution.

Two Tail T-test

A statistical hypothesis test used to determine if there is a significant difference between the means of two groups, allowing for differences in both directions.