Use the Information for the Question(s)below

question 88

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.
-The value of KD's unlevered equity is closest to:

• A)$600 million.
• B)$470 million.
• C)$390 million.
• D)$400 million.

---

Definitions:

Accounts Payable

A liability to a creditor, carried on an open account, usually for purchases of goods and services.

Indirect Method

A way of reporting cash flows from operating activities in the cash flow statement by adjusting net income for changes in non-cash accounts.

Comparative Balance Sheet

A comparative balance sheet presents the financial position of a company at different points in time side by side, to analyze trends or changes in financial status.

Net Loss

Net loss refers to the result when a company's total expenses exceed its total revenues during a specific period, indicating a negative profitability.