Consumers will often turn to one of their formal or informal groups for advice and guidance on acceptable beliefs, attitudes, and consumer behaviors. This social influence might be colleagues at work, team members on some sports team, or a club in which they are members.

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.