ABC CoAnd XYZ Co

question 69

Multiple Choice

ABC Co.and XYZ Co.are identical firms in all respects except for their capital structure.ABC is all equity financed with $480,000 in stock.XYZ uses both stock and perpetual debt; its stock is worth $240,000 and the interest rate on its debt is 9 percent.Both firms expect EBIT to be $58,400.Ignore taxes.The cost of equity for ABC is _____ percent,and for XYZ it is ______ percent.

• A)12.17; 12.68
• B)12.17; 13.33
• C)12.17; 15.33
• D)12.29; 12.68
• E)12.29; 13.33

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Definitions:

Lateral

Pertaining to the side, often used to describe the position of body parts relative to each other.

Normal Function

The regular, intended, or unimpaired operation or activity of an organism, organ, or system.

Disease Process

The series of events related to the development and progression of a disease, including its onset, symptoms, and effects on the body.