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Homework answers / question archive / Checkers, a computer manufacturer, announces that it will be acquiring Hadara Software
Checkers, a computer manufacturer, announces that it will be acquiring Hadara Software. You know the following:
Checkers had a beta of 1.6 prior to the merger. The firm has a market value of
equity of $ 8 billion and $ 6 billion in debt outstanding.
Hadara Software had a beta of 1.5 prior to the merger. The firm has a market value
of equity of $ 10 billion and $ 4 billion in debt outstanding.
Note: Checkers had bought Hadara with all debt, both firms have a 40% tax rate ,T-bond rate 0.06 and the equity risk premium is 0.053.
Please write your answers in decimals.
What is the unlevered beta for Checkers?
Answer for part 1
What is the unlevered beta for Hadara?
Answer for part 2
What is the unlevered beta for the combined firm?
Answer for part 3
What is the value of the combined firm?
Answer for part 4
What is the beta levered for the combined firm?
Answer for part 5
What is the cost of equity for the combined firm?
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