What is the new return on equity

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Reference no: EM131986702

The common stock and debt of Northern Sludge are valued at 70 million and 30 million, respectively. Investors currently require a return of 16% and a return of 7.7% on the debt. ?If Northern Sludge issues an additional $13 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 interest rate on Northern's debt and that there are no taxes.

What is the new return on equity? (percentage)

Reference no: EM131986702

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