ABC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all equity financed with $600, 000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $300, 000 and the interest rate on its debt is 4.5%. Both firms expect EBIT to be $67,000. Ignore taxes. Rico owns $36,000 worth of XYZ's stock.
What rate of return is he expecting? (Round your answer to 2 decimal places, (e.g., 32.16))
