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Unformatted text preview: equity companies (i.e. unlevered), but here is the capitalization information for each company: North Pole South Pole Debt $1,400,000 $2,600,000 Equity $2,600,000 $1,400,000 The expected return on a market portfolio is 12.40%, and the riskfree rate is 5.30%. Both companies are subject to a corporate tax of 35%. Assume the beta of the debt is zero. a. What is the equity beta of each of the two companies? b. What is the required rate of return on each companys equity?...
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This note was uploaded on 10/28/2011 for the course FIN 321 taught by Professor Smith during the Fall '08 term at University of Illinois at Urbana–Champaign.
 Fall '08
 SMITH
 Debt, Interest

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