North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity...
70.2K
Verified Solution
Link Copied!
Question
Finance
North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas of 115 if both were all equity financed. The market value information for each company is shown here: North Pole South Pole Debt $3,000,000 $ 3,910,000 Equity$ 3,910,000 $3,000,000 The expected return on the market portfolio is 11.8 percent and the risk-free rate is 3.8 percent. Both companies are subject to a corporate tax rate of 25 percent. Assume the beta of debt is zero. a. What is the equity beta of each of each company? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What is the required rate of return on equity for each company? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g. 32.16.)
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
