Questions
FIN 220 01 Final Exam _ Fall 2025
Single choice
Triangle Enterprises has no debt but can borrow at 9 percent. The firm's WACC is currently 14.7 percent, and there is no corporate tax. If the firm converts to 70 percent debt, what will its cost of equity be?
Options
A.20.67 percent
B.28.00 percent
C.24.47 percent
D.22.95 percent
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Step-by-Step Analysis
To start, I’ll lay out the setup: the firm currently has no debt and a WACC of 14.7%, with Rd = 9% for debt and no taxes. When there is no debt, the WACC equals the cost of equity, so Re (unlevered) is 14.7% in the current structure.
Now consider the proposed capital structure: 70% debt and 30% equity. The weighted average cost of capita......Login to view full explanationLog in for full answers
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