17. Leverage and Capital Costs. Hubbard's Pet Foods is financed 80% by common stock and 20% by bonds. The expected return on the common stock is 12%, and the rate of interest on the bonds is 6%. Assume that the bonds are default-free and that there are no taxes. Now assume that Hubbard's issues more debt and uses the proceeds to retire equity. The new financing mix is 60% equity and 40% debt. If the debt is still default-free, what happens to the expected rate of return on equity? What happens to the expected return on the package of common stock and bonds? (LO2)