Makhado company has an estimated beta of 1.6. The company is considering the acquisition of another company that has a beta of 1.2. Both companies are exactly the same size. Please show all calculations.

1. What is the expected new beta value for the combined firm.
2. The risk-free rate of return is estimated at 7% and the market return is estimated at 12%. What is the estimate of the required return of investors in Makhado before and after the merger? Makhado is expected to pay 1 dividend next next year(D1 = 1). This dividend is expected to grow at a 6% per year for the foreseeable future if the merger is not completed. The merger is not expected to change the current dividend rate, but future dividends are expected to grow at a7% rate as a result of the merger.
3. What is the share value of Makhado company prior to the merger?
4. What is the new share value of a stock, assuming that the merger is completed?
5. Can the merger be recommended to go ahead? Why/why not?