You have just run a regression of monthly returns on MAD, a newspaper and magazine publisher, against returns on the S&P 500, and arrived at the following result.

Intercept: -0.005% ; Slope: 1.950; R2: 45. 0%.

You now realize that MAD went through a major restructuring at the end of last month (which was the last month of your regression), and made the following changes.

The firm sold off its magazine division, which had an unlevered beta of 0.55, for 39 million.

It borrowed an additional 18 million and bought back stock worth 57 million. After the sale of the division and the share repurchase, MAD had 43 million in debt and 148 million in equity outstanding. If the firms tax rate is 40.00% percent, re-estimate the beta after these changes.

1.

HomeworkUnanswered

The value of equity before the sale of the division and stock buyback is equal to: (please enter your numbers in millions (i.e., 100 million is 100, not 100,000,000)

Type your numeric answer and submit

Numeric Answer

Unanswered3 attempts left

Please select an answer to submit

Submit

2

HomeworkUnanswered

The value of debt before the sale of the division and stock buyback is equal to

Type your numeric answer and submit

Numeric Answer

Unanswered3 attempts left

Please select an answer to submit

Submit

3

HomeworkUnanswered

The unlevered beta of the firm prior to the sale of the division and stock buyback is equal to

Type your numeric answer and submit

Numeric Answer

Unanswered3 attempts left

Please select an answer to submit

Submit

4

HomeworkUnanswered

The weight (proportion of selling unit divided by total firm value) of the selling unit is equal to (hint: please enter your answer in decimal format. i.e., 25% is 0.25)

Type your numeric answer and submit

Numeric Answer

Unanswered3 attempts left

Please select an answer to submit

Submit

5

HomeworkUnanswered

The weight of the remaining unit is equal to

Type your numeric answer and submit

Numeric Answer

Unanswered3 attempts left

Please select an answer to submit

Submit

6

HomeworkUnanswered

The unlevered beta of the remaining unit is equal to

Type your numeric answer and submit

Numeric Answer

Unanswered3 attempts left

Please select an answer to submit

Submit

7

HomeworkUnanswered

The levered beta after the sale of the division and stock buyback is equal to

Type your numeric answer and submit

Numeric Answer

Unanswered3 attempts left

Please select an answer to submit

Submit