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Estimate the beta of anadello after the acquisition

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Reference no: EM132735273

Anadello Inc, which had a market value of equity of $3 billion and debt of $500 million, and a beta of 1.32, announced that it was acquiring Tetronic Inc, which was an all-equity firm with a market value of equity of $1.5 billion and a beta of 1.8. The corporate tax rate for both firms is 40%.

Problem 1: Assume that Anadello Inc had to borrow the $1.5 billion to acquire Tetronic in cash. Estimate the beta of Anadello after the acquisition.

Reference no: EM132735273

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