What happens to the expected return on the stock

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Reference no: EM131188014

The common stock and debt of Northern Sludge are vlaued at $60 million and $40 million, respectively investors currently require a return of 16.7% on the common stock and 7.0% on the debt. If Northern Sludge issues an additional $18 million of common stock and uses this money to retire debt, what happens to the expected return on the stock? (Assume that the change in capital structure does not affect the risk of the debt and that there are no taxes. ( Do not round interemediate calculations. Enter your answer as a percent rounded to 2 decimal places)

new return on equity ___________%

Reference no: EM131188014

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