Expected stock and bonds for different debt-equity ratios

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Trombley's Pet Foods is currently financed 80% by common stock and 20% by bonds. The expected return on the common stock is 12% and the rate of interest on the bonds is 6%. Assuming that the bonds are always default-risk free, draw a graph that shows the expected stock and bonds (ra) for different debt-equity ratios.

Reference no: EM131910448

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