Use the Information for the Question(s) Below

question 55

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:

Jean Piaget

A psychologist from Switzerland renowned for his groundbreaking contributions to the study of child development, especially his cognitive development theory.

Paul Ekman

A psychologist renowned for his research on the classification of human emotions and their expression through facial expressions.

Median

The middle value in a data set, which divides the set into two equal halves.

Mode

describes the value that appears most frequently in a data set.