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ABC industries has 10 million shares outstanding with a market price of $20 per share and no debt. KD has consistently stable earnings, and pays a 35% tax rate. Management plans to borrow $100 Million on a permanent basis through a leveraged recapitalization in which they would use the borrowed funds to repurchase outstanding shares. After the recapitalization, if the price per share of KD becomes $21 the present value of KD's financial distress cost is closest to: A) 12. 5 Million B) 25 Million C) 35 Million D) 5 Million

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Financial Management, Finance

Category:- Financial Management
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