Question
Hubbard Industries is an all-equity firm whose shares have an expected return of 10.9%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until
Hubbard Industries is an all-equity firm whose shares have an expected return of
10.9%.
Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debt-equity ratio is
0.66.
Due to the increased risk, shareholders now expect a return of
17.1%.
Assuming there are no taxes and Hubbard's debt is risk-free, what is the interest rate on the debt?
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Elementary Statistics
Authors: Robert R. Johnson, Patricia J. Kuby
11th Edition
978-053873350, 9781133169321, 538733500, 1133169325, 978-0538733502
