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Hubbard's Pet Foods Is financed 70% by common stock and 30% by bonds. The expected return on the common stock is 12.5%, and the rate
Hubbard's Pet Foods Is financed 70% by common stock and 30% by bonds. The expected return on the common stock is 12.5%, and the rate of Interest on the bonds is 8.0%. 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 42% equity and 58% debt. Given the initial capital structure, calculate the expected return on assets. (Do not round Intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) Expected rate of return 96 Given the revised capital structure, calculate the expected rate of return on equity. (Do not round Intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Expected rate of return
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