Corona Enterprises, a company that operates in three businesses, with the following breakdown:

Technology Restaurants Movies

Revenues $300 $1000 $400

Unlevered Beta 1.2 0.6 0.6

The company has $ 1.5 billion in debt outstanding while the market value of equity is $ 2.5 billion. The marginal tax rate is 30%.

What is the unlevered beta for Corona Enterprises?

Answer for part 1

What is the levered beta for Corona Enterprises?

Answer for part 2

Now assume that Corona plans to sell its technology division for its fair value of $1 billion. Corona use half of the proceeds to pay debt and use the other half to pay a special diviend. Estimate the new debt to equity ratio for the company after the restructuring.

Answer for part 3

Estimate the unlevered beta of the company after the restructuring.

Answer for part 4

Estimate the levered beta of the company after the restructuring.

Answer for part 5