ABC Co. and XYZ Co. are identical firms in all respects except for their capital structures. ABC is all-equity financed with $475,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $237,500 and the interest rate on its debt is 10 percent. Both firms expect EBIT to be $53,000. Ignore taxes.
Requried:
a. Rico owns $23,750 worth of XYZ’s stock. What rate of return is he expecting?
b. Suppose Rico invests in ABC Co and uses homemade leverage. Calculate his total cash flow and rate of return.
c. What is the cost of equity for ABC and XYZ?
d. What is the WACC for ABC and XYZ?
Answers: 1
Business, 22.06.2019 09:40
As related to a company completing the purchase to pay process, is there an accounting journal entry "behind the scenes" when xyz company pays for the goods within 10 days of the invoice (gross method is used for discounts and terms are 2/10 net 30) that updates the general ledger?
Answers: 3
Business, 23.06.2019 15:00
Refer to walgreens. when walgreens' managers responded to the threat of pbms by creating walgreens health initiatives, its own pbm business, they were using control.
Answers: 3
Business, 23.06.2019 19:50
What are the real flows and money flows that run between households, firms, and governments in the circular flow model? the real flows are that flow from households to firms through markets. a. the services of factors of production; real b. payments; financial c. the services of factors of production; factor d. government goods; factor e. consumption goods; financial?
Answers: 1
ABC Co. and XYZ Co. are identical firms in all respects except for their capital structures. ABC is...
Computers and Technology, 29.11.2021 19:10
Arts, 29.11.2021 19:10
History, 29.11.2021 19:10
Mathematics, 29.11.2021 19:10
Arts, 29.11.2021 19:10
English, 29.11.2021 19:10
Mathematics, 29.11.2021 19:10
Mathematics, 29.11.2021 19:10
Mathematics, 29.11.2021 19:10
Mathematics, 29.11.2021 19:10
English, 29.11.2021 19:10