Estimate the beta after the transaction

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Reference no: EM131011421

Acopalypse Now Inc. is a company that manufactures products for the New Age market (Crystal balls, Nostradum predictors, Tarot cards etc.). The firm has 10 million shares outstanding trading at $ 10 per share, no debt outstanding and a cash balance of $ 25 million. The stock’s current beta is 1.20. The firm decides that it should prepare for the millennium by borrowing $ 15 million, using its cash balance of $ 25 million, and buying $40 million of its own stock. Estimate the beta after the transaction. (The corporate tax rate is 40%)

Reference no: EM131011421

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