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batmannn1516
batmannn1516
29.11.2019 • 
Business

Abc co. and xyz co. are identical firms in all respects except for their capital structure. abc is all equity financed with $550,000 in stock. xyz uses both stock and perpetual debt; its stock is worth $275,000 and the interest rate on its debt is 10 percent. both firms expect ebit to be $59,000. ignore taxes. a. rico owns $33,000 worth of xyz’s stock. what rate of return is he expecting? (round your answer to 2 decimal places. (e.g., 32.16)) rate of return % b. suppose rico invests in abc co and uses homemade leverage. calculate his total cash flow and rate of return. (round your percentage answer to 2 decimal places. (e.g., 32.16)) total cash flow $ rate of return %c. what is the cost of equity for abc and xyz? (round your answers to 2 decimal places. (e.g., 32.16)) cost of equity abc % xyz % d. what is the wacc for abc and xyz? (round your answers to 2 decimal places. (e.g., 32.16)) wacc abc % xyz %

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