P14-14 (similar to) Question Help Global Pistons (GP) has common stock with a market value of $240 million and debt with a value of $140 million. Investors expect a 12% return on the stock and a 9% return on the debt. Assume perfect capital markets. a. Suppose GP issues $140 million of new stock to buy back the debt. What is the expected return of the stock after this transaction? b. Suppose instead GP issues $34.39 million of new debt to repurchase stock. i. If the risk of the debt does not change, what is the expected return of the stock after this transaction? ii. If the risk of the debt increases, would the expected return of the stock be higher or lower than when debt is issued to repurchase stock in part (i)? a. Suppose GP issues $140 million of new stock to buy back the debt. What is the expected return of the stock after this transaction? If GP issues $140 million of new stock to buy back the debt, the expected return is %. (Round to two decimal places.) P14-15 (similar to) Question Help Hubbard Industries is an all-equity firm whose shares have an expected return of 11.9%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debt-equity ratio is 0.78. Due to the increased risk, shareholders now expect a return of 19.7%. Assuming there are no taxes and Hubbard's debt is risk-free, what is the interest rate on the debt? The interest rate is %. (Round to two decimal places.) P14-14 (similar to) Question Help Global Pistons (GP) has common stock with a market value of $240 million and debt with a value of $140 million. Investors expect a 12% return on the stock and a 9% return on the debt. Assume perfect capital markets. a. Suppose GP issues $140 million of new stock to buy back the debt. What is the expected return of the stock after this transaction? b. Suppose instead GP issues $34.39 million of new debt to repurchase stock. i. If the risk of the debt does not change, what is the expected return of the stock after this transaction? ii. If the risk of the debt increases, would the expected return of the stock be higher or lower than when debt is issued to repurchase stock in part (i)? a. Suppose GP issues $140 million of new stock to buy back the debt. What is the expected return of the stock after this transaction? If GP issues $140 million of new stock to buy back the debt, the expected return is %. (Round to two decimal places.) P14-15 (similar to) Question Help Hubbard Industries is an all-equity firm whose shares have an expected return of 11.9%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debt-equity ratio is 0.78. Due to the increased risk, shareholders now expect a return of 19.7%. Assuming there are no taxes and Hubbard's debt is risk-free, what is the interest rate on the debt? The interest rate is %. (Round to two decimal places.)