I)If KD Can Repurchase Its Existing Shares at $20 Per

question 3

Multiple Choice

i) 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)$23.50

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Definitions:

Cost of Debt

The actual rate at which a corporation incurs cost on its present liabilities, assessable before or after tax deductions.

Tax Rate

The quantified percentage of an individual’s or corporation’s income that is taken as tax.

Cost of Preferred Stock

The required rate of return on preferred stock, which is typically fixed.

Preferred Stock

A class of ownership in a corporation with a higher claim on assets and earnings than common stock, typically without voting rights but with a fixed dividend payment.