1. (6 points) You have been asked to estimate the beta for Rollins Inc., a firm...

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1. (6 points) You have been asked to estimate the beta for Rollins Inc., a firm that operates in two businesses - software and technology consulting. The firm currently has 80 million shares trading at $ 20/share and $ 400 million in debt outstanding. It derives 60% of its overall value from software and 40% from technology consulting. The unlevered beta is 1.2 for the software business and 0.9 for the technology consulting business. (The marginal tax rate is 40% for all firms.) a. Estimate the current levered beta for the firm. b. Assume that you are considering a plan to sell half the software business and use the proceeds to do the following: (1) Invest one-third of the proceeds in the technology consulting business. (2) Use the remaining proceeds to buy back stocks. Estimate the levered beta for the firm, if you go through with this transaction. 1. (6 points) You have been asked to estimate the beta for Rollins Inc., a firm that operates in two businesses - software and technology consulting. The firm currently has 80 million shares trading at $ 20/share and $ 400 million in debt outstanding. It derives 60% of its overall value from software and 40% from technology consulting. The unlevered beta is 1.2 for the software business and 0.9 for the technology consulting business. (The marginal tax rate is 40% for all firms.) a. Estimate the current levered beta for the firm. b. Assume that you are considering a plan to sell half the software business and use the proceeds to do the following: (1) Invest one-third of the proceeds in the technology consulting business. (2) Use the remaining proceeds to buy back stocks. Estimate the levered beta for the firm, if you go through with this transaction.