What is the interest rate on the debt issued

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Question - Alpha Corp is an all-equity firm. Its shares have an expected return of 10%. Alpha decides to undetake a leveraged recapitalization. To this end, it decides to issue debt and buy back stocks, until Marked out of 20.00 its debt-equity ratio becomes 0.60. Due to the significant increase in financial risk, shareholders question now require a rate of return of 13%. Assuming there are no taxes and Alpha's debt is risk free, what is the interest rate on the debt issued?

Reference no: EM133072628

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