ABC Co. and XYZ Co. are identical firms in all respects exce…
ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all-equity financed with $520,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $280,000 and the interest rate on its debt is 8%. Both firms expect EBIT to be $61,500. The cost of equity for ABC is _____, and for XYZ it is ______. Ignore taxes, depreciation, capital expenditures, and changes in net working capital.