Hubbards Pet Foods is financed 50% by common stock and 50% by bonds. The expected return on the common stock is 11.6%, and the rate of interest on the bonds is 6.4%. Assume that the bonds are default-free and that there are no taxes. Now assume that Hubbards issues more debt and uses the proceeds to retire equity. The new financing mix is 40% equity and 60% debt. Assume the debt is still default free.

Given the initial capital structure, calculate the expected return on equity.

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.

Given the revised capital structure, calculate the expected rate of return on equity.

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.