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

Rmad$=-0\mathrm{.}5\%+1\mathrm{.}20$randp

The regression has an R squared of $22\%.$ The current T bill rate is $5\mathrm{.}5\%$ and the current T bond rate is $6\mathrm{.}5\%.$ The risk free rate during the period of the regression was $6\%.$ Answer the following questions relating to the regression:

a$.$ Bassed on the intercept, how well or badly did MAD do$,$ relative to expectations, during the period of the regression.

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

$$ The firm sold off its magazine division, which had an unlevered beta of $0\mathrm{.}6,$ for $$20$ million.

$$ It borrowed an additional $$20$ million and bought back stock worth $$40$ million.

After the sale of the division and the share repurchase, MAD Inc. had $$40$ million in debt and $$120$ million in equity outstanding.

If the firm$$s tax rate is $40\%,$ re$-$estimate the beta, after these changes.