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Business, 24.02.2020 18:04 Jennybelandres1

ABC and XYZ are identical firms in all respects except for their capital structures. ABC is all-equity financed with $530,000 in stock. XYZ has the same total value but uses both stock and perpetual debt; its stock is worth $310,000 and the interest rate on its debt is 7.9 percent. Both firms expect EBIT to be $62,222. Ignore taxes. The cost of equity for ABC is percent and for XYZ it is percent.

a. 12.09; 9.82
b. 11.74; 14.47
c. 12.09; 12.48
d. 11.74; 9.82
e. 11.74; 12.48

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