BC Co. and XYZ Co. are identical firms in all respects except for their capital structure. ABC is all equity financed with $700,000 in stock. XYZ uses both stock and perpetual debt; its stock is worth $350,000 and the interest rate on its debt is 8.5 percent. Both firms expect EBIT to be $73,000. Ignore taxes.
Rico owns $52,500 worth of XYZ's stock. What rate of return is he expecting? (Round your answer to 2 decimal places. (e. g., 32.16))
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