What is the interest rate on the debt

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Reference no: EM131541718

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?

Reference no: EM131541718

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