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A firm currently has a debt-equity ratio of 1/2. The debt, which is virtually riskless, pays...

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Finance

A firm currently has a debt-equity ratio of 1/2. The debt, whichis virtually riskless, pays an interest rate of 8.1%. The expectedrate of return on the equity is 12%. What would happen to theexpected rate of return on equity if the firm reduced itsdebt-equity ratio to 1/3? Assume the firm pays notaxes.  (Do not round intermediate calculations.Enter your answer as a percent rounded to 2 decimalplaces.)

Expected rate of return onequity  %

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