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Recapitalization RC Media Inc. plans to issue debt and retire stock in order to lever...

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Recapitalization RC Media Inc. plans to issue debt and retire stock in order to lever up its currently unlevered financing. The recapitalization proposal is to issue $20,000,000 worth of new debt with a 5.0% interest rate and use the proceeds to buy back and retire shares of common stock that currently sell for $38. RC currently has 1,000,000 shares of common stock outstanding and its annual net operating profits are forecasted to be $3,800,000 indefinitely. Assuming perfect capital markets, calculate RC's expected return on equity for both the current and proposed capital structure. ... RC's expected return on equity for the current capital structure is %. (Round to two decimal places.) RC's expected return on equity for the proposed capital structure is %. (Round to two decimal places.)

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