The common stock and debt of Northern are valued at $46 million and $18 million, respectively. Investors currently requlre a 16% return on the common stock and an 8% return on the debt. The asset and debt betas of Northern are 1.50 and 0.20,respectively. Northern plans to issue an additional $5 million of common stock and uses this money to retire debt. Assume that the change in capital structure does not affect the risk of the debt and that there are no taxes. a. What is the expected return on the stock after the change in capital structure?

b. What is the change in the beta of the stock after the change in capital structure?