North Pole and South Pole are competitors in the same industry.Both companies face a 24% income tax rate.Both companies are levered. (North Pole and South Pole had the same equityBetas, 1.09, when they were still unlevered.) Their capital structures look like this:North Pole South PoleDebt $2,940,000 $3,850,000Equity $3,850,000 $2,940,000For both companies, the Betas for their debt is zero.Additional information about the market:The market portfolio's expected return is 11.1 %. The T-bill rate is 3.2%.a. What is the Beta of equity for North Pole and South Pole? (Do not round intermediatecalculations 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 thelevel of systematic risk. (Do not round intermediate calculations and enter youranswers as a percent rounded to 2 decimal places, e.g., 32.16.)a.North PoleSouth Poleb. North Pole%South Pole%

The levered beta will be used if the debt is used along with equity instead of alone equity. This…

North Pole and South Pole are competitors in the same industry. Both companies face a 24 % income tax rate. Both companies are levered. (North Pole and South Pole had the sam Betas, 1.09, when they were still unlevered.) Their capital structures look like this North Pole South Pole Debt $2,940,000 $3,850,000 Equity $3,850,000 $2,940,000 For both companies, the Betas for their debt is zero.

North Pole and South Pole are competitors in the same industry. Both companies face a 24 % income tax rate. Both companies are levered. (North Pole and South Pole had the sam Betas, 1.09, when they were still unlevered.) Their capital structures look like this North Pole South Pole Debt $2,940,000 $3,850,000 Equity $3,850,000 $2,940,000 For both companies, the Betas for their debt is zero.

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter18: Comparative Forms Of Doing Business

Section: Chapter Questions

Problem 16P

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