What is the interest rate on the debt

Assignment Help Financial Management

Reference no: EM131073286

Hubbard Industries is an all equity firm whose shares have an expected return of 11.3%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debt-equity ration is 0.71. Due to the increase risk, shareholders now expect a return of 18.1%. Assuming there are no taxes and Hubbard's debt is risk-free, what is the interest rate on the debt?

Reference no: EM131073286

Questions Cloud

Evaluated an early-stage investment : Venture Partners has evaluated an early-stage investment in a startup company (Startco). Startco needs $4 million in financing, and SPC has offered to provide the financing in exchange for a 40% interest in the company. What is SPC's post-money valua..

What will be swap rate on agreement to exchange currency : Suppose the U.S. yield curve is flat at 5% and the euro yield curve is flat at 4%. The current exchange rate is $1.25 per euro. What will be the swap rate on an agreement to exchange currency over a 3-year period? The swap will call for the exchange ..

Treasury strips-what is the yield to maturity : A Treasury STRIPS is quoted at 93.333 and has 4 years until maturity. What is the yield to maturity?

Steering future performance back toward the baseline : Determine the fundamental impact of not using a project management tool which clearly displays the effect of delays in delivering work packages, as required per your project schedule. Justify your response.

What is the interest rate on the debt : Hubbard Industries is an all equity firm whose shares have an expected return of 11.3%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debt-equity ration is 0.71. Due to the increase risk, shareholders now e..

Achieve organizational goals : How management and the HRM function support each other to achieve organizational goals. The role HR can play in supporting the development of organizational strategy.

Compute the price of bond : Compute the price of a 15 year bond, which pays 15.67 % coupon monthly, when investors require a 20% rate of return on such bonds. What would be its price 3 years from now, if the required rate of return at the end of 3 years is 10%?

Correlation between the daily returns : Stock X was just added to the Dow 30 Index. Prior to the addition, the correlation between the daily returns of X and the other 29 stocks in the Index was +0.40. How do you expect the daily return correlation to change after X is added to the Dow 30 ..

The sustainable growth rate : Your firm has an ROE of 12.0%, a payout ratio of 25%, $600,000 of stockholder's equity, and $400,000 of debt. If you grow at your sustainable growth rate this year, how much additional debt will you need to issue? The sustainable growth rate is %?

User Account

All Pages