ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all equity financed with $800,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $400,000 and the interest rate on its debt is 5.2 percent. Both firms expect EBIT to be $79,000. Ignore taxes.Suppose Rico invests in ABC Co. and uses homemade leverage. Calculate his total cash flow and rate of return. What is the cost of equity for ABC and XYZ?