North Pole and South Pole are competitors in the same industry. Both companies...
50.1K
Verified Solution
Link Copied!
Question
Accounting
| North Pole and South Pole are competitors in the same industry.
Both companies face a 23 % income tax rate.
Both companies are levered. (North Pole and South Pole had the same equity Betas, 1.08, when they were still unlevered.) Their capital structures look like this: |
| North Pole | South Pole | |||||
| Debt | $ | 2,930,000 | $ | 3,840,000 | ||
| Equity | $ | 3,840,000 | $ | 2,930,000 | ||
| For both companies, the Betas for their debt is zero.
Additional information about the market: The market portfolio's expected return is 11 %. The T-bill rate is 3.1 %. |
| a. | What is the Beta of equity for North Pole and South Pole? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| b. | In addition, calculate the required return on equity that would correctly reflect the level of systematic risk. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
please show equations on how to solve
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!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.