Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. north pole fishing equipment corporation and south

North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity...

70.2K

Verified Solution

Question

Finance

image

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!
Become a Member

Other questions asked by students