A firm is financed 75% by common stock and 25% by bonds. The expected return on...

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A firm is financed 75% by common stock and 25% by bonds. The expected return on the common stock is 11%, and the rate of interest on the bonds is 5%. Assume that the bonds are default free and and that there are no taxes. Now assume that the firm issues more debt and uses the proceeds to retire equity. The new financing mix is 60% equity and 40% debt. If the debt is still default free, what happens to the expected rate of return on equity? O 10.5% O11.75% O 12.5% O 11% A firm is financed 75% by common stock and 25% by bonds. The expected return on the common stock is 11%, and the rate of interest on the bonds is 5%. Assume that the bonds are default free and and that there are no taxes. Now assume that the firm issues more debt and uses the proceeds to retire equity. The new financing mix is 60% equity and 40% debt. If the debt is still default free, what happens to the expected rate of return on equity? O 10.5% O11.75% O 12.5% O 11%