SPZ Inc. is a publicly traded company that operates in both the software and media, with 70% of its value coming from software and 30% from media. You have identified several comparable firms in both sectors and collected the following information:

Software Firms Levered Beta: 1.33

Media Firms Levered Beta: 1.06

Software Firms Debt/Equity Ratio: 15%

Media Firms Debt/Equity Ratio: 40%

SPZ currently has 80 million shares outstanding trading at $12.00 per share and $250 million in 10-year bonds with a coupon rate of 6% and trading at 98%. It has a marginal tax rate of 25%.

a) Estimate SPZ's current debt/equity ratio based on market values.

b) Estimate the levered beta of SPZ based on comparable companies.

c) Now assume that SPZ plans to sell half of its software business for $400 million and borrow an additional $100 million. It will then invest $300 million of the total proceeds in a social media business and use the rest to buy back stock. If the unlevered beta of the social media business is 1.4, estimate the company's levered beta after these transactions.