Triangle Enterprises Has No Debt but Can Borrow at 8

question 8

Multiple Choice

Triangle Enterprises has no debt but can borrow at 8 percent.The firm's WACC is currently 13.2 percent, and there is no corporate tax.If the firm converts to 30 percent debt, what will its cost of equity be?

• A)16.67 percent
• B)12.95 percent
• C)14.47 percent
• D)16.39 percent
• E)15.43 percent

---

Definitions:

Current Rate Method

An accounting method for translating foreign currency financial statements where all current-year items are translated at the present exchange rate.

Ending Inventory

The total value of goods available for sale at the end of an accounting period.

Average Cost

An accounting method that calculates the cost of goods sold and ending inventory based on the weighted average of all units purchased or manufactured.