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( A B C ) Co. and ( X Y Z ) Co. are identical firms in all respects except for their capital structure. (

image text in transcribed \\( A B C \\) Co. and \\( X Y Z \\) Co. are identical firms in all respects except for their capital structure. \\( A B C \\) is all equity financed with \\( \\$ 800,000 \\) in stock. \\( X Y Z \\) uses both stock and perpetual debt; its stock is worth \\( \\$ 400,000 \\) and the interest rate on its debt is 10 percent. Both firms expect EBIT to be \\( \\$ 97,000 \\). Ignore taxes. a. Richard owns \\( \\$ 80,000 \\) worth of \\( X Y Z \\) 's stock. What rate of return is he expecting? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Suppose Richard invests in ABC Co. and uses homemade leverage to match his cash flow in part (a). Calculate his total cash flow and rate of return. (Do not round intermediate calculations. Enter your return answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the cost of equity for \\( A B C \\) and \\( X Y Z \\) ? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) d. What is the WACC for \\( A B C \\) and \\( X Y Z \\) ? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

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