# Jackson is an all-equity financed firm; its common stock has an expected return of 12%. Jackson...

###### Question:

Jackson is an all-equity financed firm; its common stock has an expected return of 12%. Jackson plans to issue debt, and use the proceeds to repurchase outstanding shares of common stock. If Jackson issues debt such that its debt-equity ratio becomes .60, the new expected return on equity will be 18%. What will be the market yield of the company's debt? Assume perfect markets.

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