d. What is the WACC for BAC and for YXZ? What principle have you illustrated?

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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d. What is the WACC for BAC and for YXZ?
What principle have you illustrated?
Transcribed Image Text:d. What is the WACC for BAC and for YXZ? What principle have you illustrated?
5. BAC Co. and YXZ Co. are identical firms in all respects except for their capital structure. BAC is all equity
financed with $800,000 in stock.
YXZ uses both stock and perpetual debt; its stock is worth $400,000 and the interest rate on its debt is 10
percent.
Both firms expect EBIT to be $95,000. Ignore taxes.
Transcribed Image Text:5. BAC Co. and YXZ Co. are identical firms in all respects except for their capital structure. BAC is all equity financed with $800,000 in stock. YXZ uses both stock and perpetual debt; its stock is worth $400,000 and the interest rate on its debt is 10 percent. Both firms expect EBIT to be $95,000. Ignore taxes.
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