Abc co. and xyz co. are identical firms in all respects except for their capital structure. abc is all equity financed with $475,000 in stock. xyz uses both stock and perpetual debt; its stock is worth $237,500 and the interest rate on its debt is 10 percent. both firms expect ebit to be $53,000. ignore taxes. a. rico owns $23,750 worth of xyz’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 rico invests in abc co. and uses homemade leverage. calculate his total cash flow and rate of return. (do not round intermediate calculations and enter your rate of return answer as a percent rounded to 2 decimal places, e. g., 32.16.) 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., 32.16.) 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., 32.16.)

1tanner invested $135,000 cash along with office equipment valued at $32,400 in the company in exchange for common stock. 2 the company prepaid $7,200 cash for 12 months’ rent for office space. (hint: debit prepaid rent for $7,200.) 3 the company made credit purchases for $16,200 in office equipment and $3,240 in office supplies. payment is due within 10 days. 6 the company completed services for a client and immediately received $2,000 cash. 9 the company completed a $10,800 project for a client, who must pay within 30 days. 13 the company paid $19,440 cash to settle the account payable created on april 3. 19 the company paid $6,000 cash for the premium on a 12-month insurance policy. (hint: debit prepaid insurance for $6,000.) 22 the company received $8,640 cash as partial payment for the work completed on april 9. 25 the company completed work for another client for $2,640 on credit. 28 the company paid $6,200 cash in dividends. 29 the company purchased $1,080 of additional office supplies on credit. 30 the company paid $700 cash for this month’s utility bill. prepare general journal entries to record these transactions. 2. post the journal entries from part 1 to the ledger accounts.

Information on gerken power co., is shown below. assume the company’s tax rate is 40 percent. debt: 9,400 8.4 percent coupon bonds outstanding, $1,000 par value, 21 years to maturity, selling for 100.5 percent of par; the bonds make semiannual payments. common stock: 219,000 shares outstanding, selling for $83.90 per share; beta is 1.24. preferred stock: 12,900 shares of 5.95 percent preferred stock outstanding, currently selling for $97.10 per share. market: 7.2 percent market risk premium and 5 percent risk-free rate. required: calculate the company's wacc. (do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) wacc %

Acorporation a. can use different depreciation methods for tax and financial reporting purposes b. must use the straight - line depreciation method for tax purposes and double declining depreciation method financial reporting purposes c. must use different depreciation method for tax purposes, but strictly mandated depreciation methods for financial reporting purposes d. can use straight- line depreciation method for tax purposes and macrs depreciation method financial reporting purposes