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Calculate unlevered beta for combined firm

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Reference no: EM132951437

ABC Ltd announced that it is acquiring XYZ Ltd for approximately Rs 60 per share and that it will finance the acquisition partly through the issue of Rs 5 billion in debt. At the time of acquisition, ABC Ltd has a market value of equity of Rs 15.55 billion, net debt outstanding of Rs 1.593 billion, and a levered beta of 1.15. XYZ, based on the Rs 60 offering price, has a market value of equity of Rs 9.25 billion, net debt outstanding of Rs 307.5 million, and a levered beta of 0.95. Tax rate is 40% both firms. Based on the weighted average of unlevered betas taking market value of firms as weights, you can combine the unlevered beta of both firms. Thus calculate unlevered beta for combined firm.

Reference no: EM132951437

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