Question
Hubbard Industries is an all-equity firm whose shares have an expected return of 10.5 % Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock,
Hubbard Industries is an all-equity firm whose shares have an expected return of
10.5 %
Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debt-equity ratio is
0.62
Due to the increased risk, shareholders now expect a return of
16.1 %
Assuming there are no taxes and Hubbard's debt is risk-free, what is the interest rate on the debt?
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Personal Finance Turning Money into Wealth
Authors: Arthur J. Keown
8th edition
134730364, 978-0134730363
