Hubbard's Pet Foods is financed $70\%$ by common stock and $30\%$ by bonds. The expected return on the common stock is $12\mathrm{.}4\%,$ and

the rate of interest on the bonds is $6\mathrm{.}8\%.$ Assume that the bonds are default$-$free and that there are no taxes. Now assume that

Hubbard's issues more debt and uses the proceeds to retire equity. The new financing mix is $56\%$ equity and $44\%$ debt. Assume the

debt is still default free.

a$.$ 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.

Answer is complete and correct.

Expected rate of return

$10\mathrm{.}7vv\%$

b$.$ 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.

Answer is complete but not entirely correct.