Estimate the unlettered beta and levered beta of hm plc

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Question - HM PLC has a capital structure of £60 million outstanding deb t and £120 million equity. KM operates 3 divisions in the following business: broadcasting, hospitality and film production. The betas for these sectors are 0.8, 1.6 and 1.2 respectively. The company is considering to sell the film production sector. The market values of the broadcasting , hospitality and film production divisions are £100 million, £30 million and £50 million. The marginal corporate tax rate is 20%.Now suppose that HMPLC wants to acquire a publishing house business.

If unlettered beta of the publishing business to be acquired is 1.5 and proposed deal is worth £70 million. Estimate the unlettered beta and levered beta of HM plc after the acquisition assuming that all cash is used for the acqision and an additional £20 million is borrowed to complete the acqision.

Reference no: EM133174720

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