Question: 2. (18 points) Problem - beta after a merger Company Computer Inc is considering acquiring Software Inc. You have the following information about the two
2. (18 points) Problem - beta after a merger Company Computer Inc is considering acquiring Software Inc. You have the following information about the two companies Company Computer Inc Levered beta 1.2 Market value of equity $2.0 billion Market value of debt $0.5 billion The marginal tax rate for each company is 20% Software Inc 1.6 $1.0 billion $0.5 billion a. (8 points) Compute the unlevered beta after the merger, c (5 points) Compute the levered beta after the merger assuming that computer Inc uses all equity (Le.issues new equity) to buy Software Inc. Computer Inc. will assume all Software Inc. debt. d. (5 points) Compute the levered beta after the merger assuming that Computer Inc borrows $0.5 billion and funds the rest with new equity to buy Software Inc. Computer Inc will assume all Software Inc debt. States) Focus
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