Shane and Diego have a signed contract for Shane to sell Diego some property in the mountains. Shane decides that he does not want to sell the property. Diego also decides that he does not want to buy the property. The meet to discuss it and agree in writing to rescind the contract. The rescission .

The common stock and debt of northern sludge are valued at $65 million and $35 million, respectively. investors currently require a return of 15.9% on the common stock and a return of 7.8% on the debt. if northern sludge issues an additional $14 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.