Durant might not play next year. Heartbreak to see arguably the best player in the game hit with the worst possible injury. He'll never be the same, if it is indeed a tear (which seems to be the case). I hope it's not as bad as it looks, even if never suits up for the Knicks.
All that said, I think the Knicks should sign him. Something like 4 years $70 million. May be that no other team would be willing to go that high, give a high salary in year 1 and then have declining cap hits. Take the risk he gets back to consistent all-star level, using the first year as goodwill. Use your cap space this year to accumulate picks (ie the Atlanta Hawks). Forget trading assets for Davis, don't spend money on borderline all-stars that function best as second or third options, and don't pay Kemba given what that contract might look like in three years. Build around RJ/DSJ/Mitch/Knox et al. Re-sign Vonleh and Mudiay, see if DeAndre comes back on a one-year deal and if you cannot get some other professionals so the team is at least a bit more competitive. There are kids worth watching, team will have cap space for at least a max, plus a returning Durant, a lottery pick in a good draft and a bevy of recent lottery picks.