Abc co and xyz co are identical firms in all respects, Financial Management

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Abc co and xyz co are identical firms in all respects

ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all equity financed with $625,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $312,500 and the interest rate on its debt is 5.5 percent. Both firms expect EBIT to be $68,000. Ignore taxes.

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Financial Management: Abc co and xyz co are identical firms in all respects

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