1. You have been asked to assess the impact of a proposed acquisition on the beta of a firm and have been provided the following information on the two firms involved in the deal: Trident Achilles (Acquirer) (Target) Number of shares outstanding 1500 1000 Share price $8.00 $6.00 Market & Book value of debt $3000 $4000 Book value of equity $8000 $8000 Levered Beta 1.2 1.5 Tax rate 40% 40% Rating AAA BBB Default spread 0.50% 2.50% The riskfree rate is 4% and the equity risk premium is 6%. a. Estimate the unlevered beta of the combined firm. (3 points) b. Now assume that Trident plans to retire all of Achilles' debt and that it will be able to buy Achilles's equity at the current market price. If Trident would like to have a levered beta of 1.35 for the combined firm after the transaction, estimate how much new debt it will need to raise to finish this acquisition. (2 points)