ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all equity financed with $525,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $262,500 and the interest rate on its debt is 5.3 percent. Both firms expect EBIT to be $57,000. Ignore taxes.

b.	Suppose Rico invests in ABC Co. and uses homemade leverage. Calculate his total cash flow and rate of return.