Triangle Enterprises Has No Debt but Can Borrow at 9

question 54

Multiple 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?

• A)20.67 percent
• B)22.95 percent
• C)24.47 percent
• D)26.39 percent
• E)28.00 percent

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Definitions:

Hedge Ratio

The ratio that compares the value of the position protected via a hedge to the size of the entire position itself.

Dollar Change

The difference in an asset's price when compared to a previous price, often used to quantify gains or losses in securities.

Hedge Ratio

The ratio of the size of a position in a hedging instrument to the size of the position being hedged, used to minimize risk.

Dollar Exposure

The extent to which a company or investor is affected by changes in the value of the U.S. dollar against foreign currencies.