Use the Information for the Question(s) Below

question 17

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:

Preconventional Moral Reasoning

The first level in Kohlberg’s theory of moral development, where behavior is guided by consequences, including rewards and punishments, rather than by societal standards or ethical principles.

Autonomous Morality

Piaget’s second stage of morality in which children have a more flexible view of rules as they begin to value fairness and equality and account for factors like act, intent, and situation.

Heteronomous Morality

Piaget’s first stage of morality when children become aware of rules and view them as absolute and unalterable.

Mutual Perspective Taking

The ability to understand the thoughts and feelings of others from their viewpoint as well as one's own.