Checkers, a computer manufacturer, announces that it will be acquiring Hadara Software. You know the following:

Checkers had a beta of 1.2 prior to the merger. The firm has a market value of

equity of $ 10 billion and $ 2 billion in debt outstanding.

Hadara Software had a beta of 1.7 prior to the merger. The firm has a market value

of equity of $ 8 billion and $ 2 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 0.073.

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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