Question: Please answer the questions in details with a clear answer. If you dont know the answer please DO NOT ANSWER. Thank you! 3. Chrysler, the

Please answer the questions in details with a clear answer. If you dont know the answer please DO NOT ANSWER. Thank you! Please answer the questions in details with a clear answer. If

3. Chrysler, the automotive manufacturer, had a beta of 1.05 in 1995. It had 13 billion in debt outstanding in that year and 355 million shares trading at 50 per share. The marginal tax rate was 36 percent. Note: Ibillion=1,000 million a. Estimate the unlevered beta of the firm. (5 points) b. Suppose the firm paid out a special dividend of 5 billion, what is the new beta for Chrysler after the special dividend? Hint: dividend only reduces equity. (8 points)

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