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You have been asked to assess the impact of a proposed acquisition on the beta of a firm and have been provided the following information
You have been asked to assess the impact of a proposed acquisition on the beta of a firm and have been provided the following information on the two firms involved in the deal:
The risk-free rate is 4% and the equity risk premium is 6%.
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Now assume that Acquirer plans to retire all of Targets debt and that it will be able to buy Targets equity at the current market price. If Acquirer would like to have a levered beta of 1.35 for the combined firm after the transaction, estimate how much new debt it will need to raise to finish this acquisition.
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