ABCC o$.$ and $xYZC{o}^a.$ are identical firms in all respects except for their capital structures.

ABC is all$-$equity financed with $$400,000$ in stock. $xYZ$ uses both stock and perpetual

debt; its stock is worth $$200,000$ and the interest rate on its debt is $5\mathrm{.}8$ percent. Both

firms expect EBIT to be $$45,000.$ Ignore taxes.

a$.$ Richard owns $$20,000$ worth of XYZ$\text{'}$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$.,32\mathrm{.}16.)$

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. $($Enter your return

answer as a percent. Do not round intermediate calculations and round your

answers to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

c$.$ What is the cost of equity for ABC and $xYZ?($Do not round intermediate calculations

and enter your answers as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

d$.$ What is the WACC for ABC and $xYZ?($Do not round intermediate calculations and

enter your answers as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

Answer is not complete.