Hartford Mining has 90 million shares that are currently trading for $2 per share and $160 million
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Hartford Mining has 90 million shares that are currently trading for $2 per share and $160 million worth of debt. The debt is risk free and has an interest rate of 4%, and the expected return of Hartford stock is 11%. Suppose a mining strike causes the price of Hartford stock to fall 25% to $1.50 per share. The value of the risk-free debt is unchanged. Assuming there are no taxes and the risk (unlevered beta) of Hartford’s assets is unchanged, what happens to Hartford’s equity cost of capital?
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Related Book For
Corporate Finance The Core
ISBN: 9781292158334
4th Global Edition
Authors: Jonathan Berk, Peter DeMarzo
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