Triangle Ltd is an ASX listed company which aims to acquire 100% shares of an unlisted...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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. a) If risk free rate is 4.3% and return on market is 9.3%, calculate Triangle cost of equity using CAPM. b) How much is Triangle WACC if tax rate is 30% and cost of debt is 7.5%? c) Calculate WACC of Square. d) Explain in detail what would happen if Triangle evaluated the purchase of Square using WACC of Triangle? 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. a) If risk free rate is 4.3% and return on market is 9.3%, calculate Triangle cost of equity using CAPM. b) How much is Triangle WACC if tax rate is 30% and cost of debt is 7.5%? c) Calculate WACC of Square. d) Explain in detail what would happen if Triangle evaluated the purchase of Square using WACC of Triangle?
Expert Answer:
Answer rating: 100% (QA)
a b c d as the capital structure of the Square is less risky than the cost of capital of the triangl... View the full answer
Related Book For
Managing Supply Chain and Operations An Integrative Approach
ISBN: 978-0132832403
1st edition
Authors: Thomas Foster, Scott E. Sampson, Cynthia Wallin, Scott W Webb
Posted Date:
Students also viewed these accounting questions
-
An umbrella maker is deciding whether to concentrate on eastern or western Canada. To help decide, she randomly selects cities from both parts of the country, and obtains the corresponding annual...
-
The owner of a small pizzeria is deciding whether to increase the radius of delivery area by one mile. What considerations must be taken into account if such a decision is to increase profitability?
-
n Karlson Roller Skates has three product lines-D, E, and F. The following information is available: E F Sales revenue $70.000 $60,000 $31,000 Variable costs (40,000) (15,000) (12,000) Contribution...
-
Besides warehouse layout decisions, what are some other applications where ranking items according to bang/buck might make sense?
-
The article Should Canada Allow Direct-to- Consumer Advertising of Prescription Drugs? (Canadian Family Physician [2009]: 130131) calls for the legalization of advertising of prescription drugs in...
-
Your firm is auditing the financial statements of Newthorpe Manufacturing Limited for the year ended 30 June 20X0. You have been assigned to the audit of the companys fixed assets, which comprise...
-
Find a case in California that discusses the hearsay exception. What did the court rule?
-
A gas-turbine power plant operates on the simple Brayton cycle between the pressure limits of 100 and 1200 kPa. The working fluid is air, which enters the compressor at 30°C at a rate of 150...
-
3. Heal Sdn Bhd Heal Sdn Bhd, a limited liability company, manufactures various heating products which it sells to both High Street and catalogue retailers. The statement of financial position for...
-
The treasurer for Brookdale Clothing must decide how much money the company needs to borrow in July. The balance sheet for June 30, 2004 is presented below: Brookdale Clothing Balance Sheet June 30,...
-
Describe how market mediation costs changes as products become more innovative according to Marshall Fischer (What is the Right Supply Chain).
-
Powlowski is currently considering investing in "Machine A" that will enable greater manufacturing efficiency. The machine is expected to have a useful life of 10 years, a salvage value of $5,000,...
-
ed At the beginning of Year 2, the accounting records of Grace Company included the accounts and balances shown on the first row of the table below. During Year 2, the following transactions...
-
Our company makes and sells a single product. We are currently working on our 2021 budgets. We started by estimating unit sales (data for January - April is below; March unit sales intentionally...
-
A faction of Americans protested against accepting minors into the country because of the potential burden and threat that the newcomers might pose to local communities. Do you think there are limits...
-
Congress has used both "carrots" and "sticks" to encourage greater investment in pediatric drug research. What legislation can be described as a "carrot"? What legislation can be described as a...
-
Over-the-Counter (OTC) Medication Homework Assignment Think Critically (1 pt each) 1. In a chain store or mass merchandiser outlet, where is the pharmacy located? Why? 2. The FDA recently allowed...
-
$10,000 was borrowed at 3.5% on July 17. The borrower repaid $5000 on August 12, and $2000 on September 18. What final payment is required on November 12 to fully repay the loan?
-
Discuss how a supplier scorecard should be developed to provide supplier feedback.
-
Use the following information to expedite the project by two weeks. Project times are in weeks. Activity Normal Task Crash Time Weekly Crash Crical Task Costs 200 300 100 400 250 Time Yes 14 12 10 12...
-
A company is preparing for a cycle count of its inventory. The companys ERP inventory report showed the following values for the products under review. Which items would you classify as being A...
-
Find all elements of the matrix $\exp (i \alpha A)$, where $$A=\left(\begin{array}{lll} 0 & 0 & 1 \tag{6.407}\\ 0 & 0 & 0 \\ 1 & 0 & 0 \end{array} ight)$$
-
Starting from the relation $\left[H_{i}, E_{\alpha} ight]=\alpha_{i} E_{\alpha}$ and its adjoint, and using the Hermiticity of the Cartan generators, show that the $E_{\alpha} \mathrm{s}$ are...
-
Given the generators $X_{a}$ (with $a=1, \ldots, N$ ) of a Lie algebra, prove that the second-order Casimir operator $C^{(2)}=\sum_{a=1}^{N} X_{a} X_{a}$ commutes with all the generators.
Study smarter with the SolutionInn App