Home / Questions / Show transcribed image text Homemade Leverage and WACC LO1 ABC Co and XYZ Co are identical...
Show transcribed image text Homemade Leverage and WACC [LO1] ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all equity financed with $800,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $400,000 and the interest rate on its debt is 5.2 percent. Both firms expect EBIT to be $79,000. Ignore taxes. Rico owns $60,000 worth of XYZ's stock. What rate of return is he expecting? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Suppose Rico invests in ABC Co. and uses homemade leverage. Calculate his total cash flow and rate of return. (Do not round intermediate calculations. Enter your rate of return answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the cost of equity for ABC and XYZ? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) What is the WACC for ABC and XYZ? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
May 21 2020 View more View Less
Question 3 (2 points) The cost (in dollars) of producing x cases of JUULpods is given by C(x) = 600 + 11x + 0.4x^2. Find the instantaneous rate of change of C with respec...
May 13 2021A projectile is fired from a gun with an initial velocity of 300 m/s at an angle of 60° above the horizontal shown in the figure. When the projectile is at the top of its...
May 31 2021Drawing on a minimum of 8 academic sources, as well as other sources, provide a 1200-word essay response and a 300-word essay plan to ONE of the topics listed below. The...
Feb 01 2020Compare and contrast direct finance and indirect finance. Which is more likely to have a larger share of the total financial market in a mature economy? In a young econom...
Jul 31 2020If the tax rate is 40 percent, compute the before tax real interest rate and the after-tax real interest rate in each of the following cases. a. The nominal interest rat...
May 01 2020Chapter 4 Exercise 77. Overhead application: Working backwardThe Towson Manufacturing Corporation applies overhead on thebasis of machine hours. The following divisional ...
Jun 11 2021Write a program that accepts a number of minutes and converts it both to hours and days. For example, 6000 minutes equals 100 hours and equals 4.167 days. Save the class ...
Apr 02 2020Criteria Excellent The student shows how three tools are T Discuss and show how tools are used used to implement fiscal policy by to implement fiscal policy by changing c...
Feb 01 2020Selected account balances before adjustment for Intuit Realty at November 30, the end of the current year, follow: DebitsCreditsAccounts Receivable $75,000Equipment 250...
Apr 11 2021Assume that your EOQ is 500 cans. If you purchase 500 cans, you pay $343.50. If you buy 1,000 cans, you pay $650.00; 500 cans represents a threemonth supply, and 1,000 ca...
Apr 13 2020