A. Compute the unlevered beta corrected for cash for each firm.

B. Using the unlevered beta corrected for cash, calculate the unlevered beta of Textron after the acquisition.

C. Using the unlevered beta corrected for cash, calculate the unlevered beta of Textron after the acquisition

2. (20 points) Problem - beta after acquisition In 1984, Textron Inc acquired Avco Corp and at the time of the acquisition, the following information was available about the two companies: Company Levered beta Market value of equity Market value of debt Cash Marginal tax rate Textron Inc 1.16 $1.4 billion $150 million $43 million 46% Avco Corp 1.36 $1.3 billion $100 million $61 million 46% 2. (20 points) Problem - beta after acquisition In 1984, Textron Inc acquired Avco Corp and at the time of the acquisition, the following information was available about the two companies: Company Levered beta Market value of equity Market value of debt Cash Marginal tax rate Textron Inc 1.16 $1.4 billion $150 million $43 million 46% Avco Corp 1.36 $1.3 billion $100 million $61 million 46%