British Airway is planning to issue additional ordinary shares. As a result, the firms debt-equity ratio is expected to decrease from 40 percent to 30 percent. The firm currently has 10 million worth of debt outstanding. The cost of this debt is 8 percent per year. British Airway expects to have an EBIT of 4m per year in perpetuity. British Airway pays no taxes. Assume MM propositions hold in this case. Discuss the possible effect of the equity announcement on the return on equity and firm value. What is the expected return on the firms equity AFTER the equity announcement?