Use the Information for the Question(s)below

question 54

Essay

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 35% 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.
-Assume the following tax schedule:
Personal Tax Rates

Considering the effect of personal taxes,calculate the PV of the interest tax shield provided by KD's recapitalization in 2005.

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Definitions:

Crude Supply

Indicates the total quantity of crude oil available for refining or processing, coming from domestic production or imports.

Polluter Pays Principle

A principle in environmental policy that requires those who produce pollution to bear the costs of managing it to prevent damage to human health or the environment.

Advance Disposal Fees

Advance disposal fees are charges paid upfront by consumers for the future recycling or disposal of products, particularly those that are hazardous or difficult to dispose of.

Take Back Mandates

Regulations or policies requiring companies to retrieve and responsibly dispose or recycle their products at the end of their life cycle.