KD Industries has 30 million shares outstanding with a market price of $20 per share and...

 

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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. a. I If KD can repurchase its existing shares at $20 per share, what will the new share price (of remaining shares) be after the transaction? b. I Would KD's shareholders be interested in tendering their shares at $20 per share? Explain. c. IIf your answer to b) is "no" find the minimal share price at which KD's shareholders be willing to sell their shares. Provide computations. 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. a. I If KD can repurchase its existing shares at $20 per share, what will the new share price (of remaining shares) be after the transaction? b. I Would KD's shareholders be interested in tendering their shares at $20 per share? Explain. c. IIf your answer to b) is "no" find the minimal share price at which KD's shareholders be willing to sell their shares. Provide computations.

Answer rating: 100% (QA)

answer KD Industries Leveraged Recapitalization a New Share Price Since KD repurchases shares at the current market price of 20 the total number of sh... View the full answer