Question
Industries is an all-equity firm whose shares have an expected return of 9.0%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its
Industries is an all-equity firm whose shares have an expected return of
9.0%.
Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debt-equity ratio is
0.44.
Due to the increased risk, shareholders now expect a return of
12.2%.
Assuming there are no taxes and Hubbard's debt is risk-free, what is the interest rate on the debt?
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Fundamentals Of Corporate Finance
Authors: Richard A. Brealey, Marcus, Alan J, Myers, Stewart C.
2nd Edition
0070074860, 9780070074866
