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HH Industries has 50 million shares that are currently trading for $4 per share and $200...

HH Industries has 50 million shares that are currently trading for $4 per share and $200 million worth of debt. The debt is risk free and has and interest rate of 5%, and the expected return of HH stock is 11%. Suppose a strike causes the price of HH stock to fall 25% to $3 per share. The value of the risk free debt is unchanged. Assuming there are no taxes and the risk of HH's assets is unchanged, what happens to HH's equity cost of capital?

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 8 months ago
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