Question

In: Finance

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

North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas of 1.11 if both were all equity financed. The market value information for each company is shown here:

  

North Pole South Pole
  Debt $ 2,960,000 $ 3,870,000
  Equity $ 3,870,000 $ 2,960,000

  

The expected return on the market portfolio is 11.4 percent and the risk-free rate is 3.4 percent. Both companies are subject to a corporate tax rate of 21 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.)

Solutions

Expert Solution

­

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas...
North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas of 1.25 if both were all equity financed. The market value information for each company is shown here: North Pole South Pole Debt $ 3,100,000 $ 4,010,000 Equity $ 4,010,000 $ 3,100,000 The expected return on the market portfolio is 12.8 percent and the risk-free rate is 4.8 percent. Both companies are subject to a corporate tax rate of 25 percent. Assume the beta...
Problem 18-5 Beta and Leverage North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation...
Problem 18-5 Beta and Leverage North Pole Fishing Equipment Corporation and South Pole Fishing Equipment Corporation would have identical equity betas of 1.14 if both were all equity financed. The market value information for each company is shown here:    North Pole South Pole   Debt $ 2,990,000 $ 3,900,000   Equity $ 3,900,000 $ 2,990,000    The expected return on the market portfolio is 11.7 percent and the risk-free rate is 3.7 percent. Both companies are subject to a corporate tax...
The earth’s north pole is a magnetic south pole. The field above the pole is ~0.05mTesla....
The earth’s north pole is a magnetic south pole. The field above the pole is ~0.05mTesla. A proton from the sun with a velocity of 1,000,000 m/s enters this magnetic field. a) Find the force on the proton if the velocity is perpendicular to the Magnetic field. b) This is a centripetal force that makes them take circular orbits. Find the radius of the orbit.
What are magnetic poles? Why are they called north pole and south pole?
What are magnetic poles? Why are they called north pole and south pole?
The Earth's magnetic field Select one: a. has flipped its North and South pole directions numerous...
The Earth's magnetic field Select one: a. has flipped its North and South pole directions numerous times b. controls the orbit of the Moon c. is generated by The Sun d. has remained constant since it was first created
Markey Corporation consists of two divisions, North and South. The North makes Glop, a product that...
Markey Corporation consists of two divisions, North and South. The North makes Glop, a product that can be used in the production of the product that the South division makes and sells. Both divisions are considered profit centers. The following data are available concerning Glop and the two divisions: North South Average units produced 150,000 Average units sold 150,000 Variable manufacturing cost per unit $2 Variable finishing cost per unit $5 Fixed divisional costs $75,000 $125,000 The North Division can...
The Civil War was a ruinous war for both North and South. Could it have been...
The Civil War was a ruinous war for both North and South. Could it have been avoided and if so how? If you think it could not have been avoided, why not?
Data for January for Corporation and its two major business segments, North and South, appear below:...
Data for January for Corporation and its two major business segments, North and South, appear below: Sales revenues, North $660,000 Variable expenses, North $383,000 Traceable fixed expenses, North $79,000 Sales revenues, South $510,000 Variable expenses, South $291,000 Traceable fixed expenses, South $66,000 In addition, common fixed expenses totaled $179,000. A properly constructed segmented income statement in a contribution format would show that the net operating income of the company as a whole is:
The management of Osborn Corporation is investigating an investment in equipment that would have a useful...
The management of Osborn Corporation is investigating an investment in equipment that would have a useful life of 6 years. The company uses a discount rate of 12% in its capital budgeting. The net present value of the investment, excluding the annual cash inflow, is ?$406,214. To the nearest whole dollar how large would the annual cash inflow have to be to make the investment in the equipment financially attractive? (Ignore income taxes.) Click here to view Exhibit 13B-1 and...
The Kelsh Company has two divisions--North and South. The divisions have the following revenues and expenses:...
The Kelsh Company has two divisions--North and South. The divisions have the following revenues and expenses: North South Sales $1,060,000     $976,000    Variable Expenses $522,000     $348,000    Traceable Fixed Expenses $356,000     $290,000    Allocated Common Corporate Expenses $256,000     $206,000    Net Operating Income (Loss) $(74,000)    $132,000    Management at Kelsh is pondering the elimination of North Division. If North Division were eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT