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  3. hubbard's pet foods is financed 90% by common stoc

Hubbard's Pet Foods is financed 90% by common stock and 10% by bonds. The expected...

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Accounting

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Hubbard's Pet Foods is financed 90% by common stock and 10% by bonds. The expected return on the common stock is 13.9%, and the rate of interest on the bonds is 7.3%. 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 63% equity and 37% debt. Assume the debt is still default free. a. 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 b. 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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