ABC and XYZ are identical firms in all respects except for theircapital structures. ABC is all-equity financed with $530,000 instock. XYZ has the same total value but uses both stock andperpetual debt; its stock is worth $310,000 and the interest rateon its debt is 7.9 percent. Both firms expect EBIT to be $62,222.Ignore taxes. The cost of equity for ABC is ________ percent andfor XYZ it is ________ percent. Select one: A. 12.09; 12.48 B.11.74; 9.82 C. 11.74; 14.47 D. 12.09; 9.82 E. 11.74; 12.48
