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.

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Definitions:

Precision Tooling

Refers to highly accurate tools and equipment designed for specialized manufacturing tasks, particularly in machining and assembly operations.

Dissolve

To officially terminate the legal existence of an entity such as a corporation or partnership.

Declining Home Prices

A decrease in the market value of residential properties, which can affect homeownership affordability and the overall economy.

Appraisal Right

A shareholder's right to have their shares appraised and to receive monetary compensation in lieu of unfavorable corporate actions, such as mergers or acquisitions.