Finance Assignment | Professional Writing
June 11th, 2020
ABC Corporation and XYZ Corporation are identical firms in all aspects except for their capital structure (i.e. they have exactly the same assets/business but different capital structures).
ABC is financed by 100% equity. XYZ is financed by 30% debt and 70% equity. The current WACC for ABC is 11%. XYZ currently borrows at a rate of 6%. The corporate tax rate is 20%. The current cost of equity for XYZ is? O A. 13.7% O B. 12.7% O C. 11.5% O D. 10.0% O E. 8.7%
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