Question: Please solve this problem showing the calculations steps. Thank you Hubbard Industries is an all-equity firm whose shares have an expected return of 8.6%. Hubbard

Please solve this problem showing the calculations steps. Thank you

Please solve this problem showing the calculations steps. Thank you Hubbard Industries

Hubbard Industries is an all-equity firm whose shares have an expected return of 8.6%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debt-equity ratio is 0.39. Due to the increased risk, shareholders now expect a return of 11.2%. 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.)

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