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What is the current value of kd equity

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KD Industries is an all equity firm that has 30 million shares outstanding with a market price of $20 per share. KD has had consistently stable earnings and pays a 35% tax rate. Management plans to borrow $200 million on a permanent basis, they would use the borrowed funds to repurchase outstanding shares.

(a) What is the current value of KD's equity (rounded to the nearest $1M)?

(b) What is the present value of KD's interest tax shield on the planned borrowings?

(c) After recapitalization, what is the value of a share of KD's stock?

Reference no: EM132537890

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