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?

Answer rating: 100% (QA)

Answer Interest rate on the debt is 154 Let the i... View the full answer