The beta of Sanafil is 1.2.Sanafil is evaluating a merger with Matra, a firm that has a beta of 0.95.Sanafil's stock sells for $40 per share and there are 10 million shares outstanding.Matra's stock sells for $60, but there are only 2 million shares outstanding.If these two firms merge, what will be the merged firm's beta?
MVS = $40(10,000,000) = $400,000,000 MVM = $60(2,000,000) = $120,000,000
A)1.00
B)1.14
C)1.05
D)1.16

Question

Quizplus · Accepted Answer

βp = (120/520)(0.95) + (400/520)(1.2) = 1.14

The Beta of Sanafil Is 1