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Hartford Mining has 50 million shares that are currently trading for $7 per share and $130 million worth of debt.

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Hartford Mining has 50 million shares that are currently trading for  $7 per share and $130 million worth of debt. The debt is risk free and has an interest rate of  7%â,

and the expected return of Hartford stock is  10%. Suppose a mining strike causes the price of Hartford stock to fall  22% to  $5.46 per share. The value of theâ risk-free debt is unchanged. Assuming there are no taxes and the riskâ (unlevered beta) ofâ Hartford’s assets isâ unchanged, what happens toâ Hartford’s equity cost ofâ capital?

 
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