Use the Information for the Question(s) Below

question 32

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 15% 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) $70 million

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