Hubbard Industries is an all-equity firm whose shares have an expected return of 11.1%. Hubbard does a
Fantastic news! We've Found the answer you've been seeking!
Question:
Hubbard Industries is an all-equity firm whose shares have an expected return of 11.1%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock until its debt-equity ratio is 0.69. Due to the increased risk, shareholders now expect a return of 17.7%. Assuming there are no taxes and Hubbard's debt is risk-free, what is the interest rate on the debt?
Related Book For
Financial Accounting an introduction to concepts, methods and uses
ISBN: 978-0324789003
13th Edition
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis
Posted Date: