Problem 16-11 Leverage and the Cost of Capital (LO1) Astromet is financed entirely by common stock and has a beta of 1.40. The firm pays no taxes. The stock has a price-earnings multiple of 13.0 and is priced to offer an expected return of 10.7%. The company decides to repurchase half the common stock and substitute an equal value of debt. Assume that the debt yields a risk-free 5.0%. Calculate the following a. The beta of the common stock after the refinancing (Round your answer to 1 decimal place.) Beta of the common stock 2.8 b. The required return and risk premium on the common stock before the refinancing (Enter your answer as a percent rounded to 1 decimal place.) Required return Risk premium 10.71% 5.71 %