Consider a simple firm that has the following market$-$value balance sheet:

Next year, there are two possible values for its assets, each equally likely: $$1,220$ and $$970.$ Its debt will be due with $4\mathrm{.}9\%$ interest. Because all of the cash flow

the assets must go either to the debt or the equity, if you hold a portfolio of the debt and equity in the same proportions as the firm's capital structure, your portfolio

should earn exactly the expected return on the firm's assets. Show that a portfolio invested $41\%$ in the firm's debt and $59\%$ in its equity will have the same expected

return as the assets of the firm. That is$,$ show that the firm's WACC is the same as the expected return on its assets.

If the assets will be worth $$1,220$ in one year, the expected return on assets will be $22\mathrm{.}0\%.($Round to one decimal place.$)$

If the assets will be worth $$970$ in one year, the expected return on assets will be $-3\mathrm{.}0\%.($Round to one decimal place.$)$

The expected return on assets will be $\%.($Round to one decimal place.$)$

For a portfolio of $41\%$ debt and $59\%$ equity, the expected return on the debt will be $\%.($Round to one decimal place.$)$