Use the Information for the Question(s)below

question 58

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 can repurchase its existing shares at $20 per share,what will the new share price be after the transaction?

• A)$22.35
• B)$22.00
• C)$22.65
• D)$22.10

Identify the costs associated with bankruptcy and financial distress.

Understand the methods and priorities in corporate bankruptcy proceedings.

Grasp the theoretical frameworks explaining capital structure choices and their impact on firm valuation.

Recognize the role of homemade leverage and its implications on investors' portfolio decisions.

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Definitions:

Anticipatory Repudiated

Anticipatory Repudiation occurs when one party to a contract indicates they will not fulfill their contractual obligations before they are due to perform.

Breach Of Contract

The violation of any agreed-upon terms or conditions in a contract without lawful excuse.

Breach Of Contract

The failure to perform as specified in a contract without a legitimate legal excuse.

Commercial Impracticability

A principle where performance under a contract is deemed unduly burdensome due to unforeseen events, relieving the obligated party.