Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Triangle Ltd is an ASX listed company which aims to acquire 100% shares of an unlisted firm, Square Ltd, both of which operate in the
Triangle Ltd is an ASX listed company which aims to acquire 100% shares of an unlisted firm, Square Ltd, both of which operate in the same industry.
Triangle capital structure comprises of 50% Debt and 50% equity with beta debt of 1.34. To finance acquiring Square, Triangle is facilitated to borrow up to 35% of funds needed with no material effect on its credit rating.
- If risk free rate is 4.3% and return on market is 9.3%, calculate Triangle cost of equity using CAPM.
1 Mark
- How much is Triangle WACC if tax rate is 30% and cost of debt is 7.5%?
2 Marks
- Calculate WACC of Square.
2 marks
- Explain in detail what would happen if Triangle evaluated the purchase of Square using WACC of Triangle?
5 Marks
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started