North pole fishing equipment plc and south pole fishing, Ask an Expert

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North Pole Fishing Equipment plc and South Pole Fishing Equipment plc would have identical equity betas of 1.16 if both were all-equity financed. The market value information for each company is shown here:

North Pole South Pole
Debt £ 1,430,000 £ 2,620,000
Equity £ 2,580,000 £ 1,400,000

The expected return on the market portfolio is 11.7 per cent, and the risk-free rate is 6.1 per cent. Both companies are subject to a corporate tax rate of 27 per cent. Assume the beta of debt is zero.

Requirement 1:

What is the equity beta of each of the two companies? (Round your answers to 2 decimal places (e.g., 32.16).)

Equity beta
North Pole ?
South Pole ?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9883867

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