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7. Hubbard Industries is an all-equity firm whose shares have an expected return of 8.4%....

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7. Hubbard Industries is an all-equity firm whose shares have an expected return of 8.4%. Hubbard does a leveraged recapitalization, issuing debt and repurchasing stock, until its debt-equity ratio is 0.36. Due to the increased risk, shareholders now expect a return of 10.6%. 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.) Hartford Mining has 50 million shares that are currently trading for $8 per share and $110 million worth of debt. The debt is risk free and has an interest rate of 2%, and the expected return of Hartford stock is 14%. Suppose a mining strike causes the price of Hartford stock to fall 20% to $6.40 per share. The value of the risk-free debt is unchanged. Assuming there are no taxes and the risk (unlevered beta) of Hartford's assets is unchanged, what happens to Hartford's equity cost of capital? Equity cost of capital is \%. (Round to two decimal places.)

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