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 %
Sell-from-stock means fulfilling customer orders directly from the company inventory of finished goods. This is commonly used among companies that sell directly to customer via retail. There is a limitation by customers to order or purchase only those products that are in stock. while on the other hand configure-to-sell involves taking a standard or base model of a product and then configuring it to meet the customer's special needs by adding either special options or add-on parts
The human population grew from 1 billion in the year 1800 to 6 billion in the year 2000. People are living longer than they ever have with newer medical practices. Families are also having more children.