Combo Department Store Company is financed entirely by common stock that is priced to offer an average return of 15% per year. If the company repurchases 20% of the stock and substitutes an equal value of debt yielding 10%, what is the expected return on the common stock after refinancing, in the world without taxes?

a.

None of the choices

b.

35%

c.

16.3%

d.

12.5%