Q1. Firm XYZ is currently financed entirely with equity. The market value of the firm's assets and equity is = = 500, and the expected return on the firm's assets and equity is = = 12.5 percent. Suppose the firm issues debt with a value of = 200, and uses the proceeds to retire equity. The market value of the firm remains the same, = + = 500. If the expected return on the debt is = 7 percent, what is the expected return on the firm's levered equity?