Question: Part two: Problem-solving (15 marks) Question one: (6 marks) Mada, a computer manufacturer, announces that it will be acquiring Call U Software. Mada had a

Part two: Problem-solving (15 marks) Question one: (6 marks) Mada, a computer manufacturer, announces that it will be acquiring Call U Software. Mada had a beta of 1.8 prior to merger. Mada has a market value of equity of $12 billion and $10 billion in debt outstanding. Call U Software had a beta of 1.2 prior to merger. The firm has a market value of equity of $10 billion and $2 billion in debt outstanding. Note: Mada had bought call u with all equity; both firms have a 40% tax rate. a. Estimate the unlevered beta for Mada. (1 mark) b. Estimate the unlevered beta for Call U. (1 mark) c. Estimate the unlevered beta for the combined firm. (2 marks) d. Estimate the levered beta for the combined firm.(2 marks)

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