Hubbard's Pet Foods is financed 60% percent by common stock and 40% percent by bonds. The expected return on the common stock is 13.3 percent and the rate of interest on the bonds is 7.1 percent. Assume that the bonds are default free and that there are no taxes. Now assume that Hubbards isues more debt and uses the procedes to retire equity. Thr new financing mix is 42% equity and 58% debt.

A- Given the initial capital structure, calculate the expected return on assets.

B- Given the revised capital structure, calculaye the expected return on equity.