General Systems, a computer manufacturer, announces that it will be acquiring FastWorks Software. You know the...

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Finance

General Systems, a computer manufacturer, announces that it willbe acquiring FastWorks Software. You know the following –
• General Systems had a levered beta of 1.09 prior to themerger. The firm has a market value of equity of $12 billion and$16 billion in debt outstanding.
• FastWorks Software had a levered beta of 1.30 prior to themerger. The firm has a market value of equity of $6.00 billion and$6.00 billion in debt outstanding.
If you were told that the combined firm’s levered beta will be1.270 after the acquisition, how much debt did General Systems useto acquire FastWorks? [You can assume that General Systems willassume Fastworks’ existing debt]. Both firms have a 40.00%Taxrate
a. debt to equity ratio after the merger(in decimal form)
b. debt to capital after transaction
c. dollar value of debt in the merged firm
d. dollar value of debt in existing companies
e. new debt issued to finance the transaction

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a Market Value of Equity of general systems 12billion Market Value of Debt of general systems 16billion Levered Beta of General Systems 109 Unlevered Beta Levered Beta 1 Debt Equity See Answer

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General Systems, a computer manufacturer, announces that it willbe acquiring FastWorks Software. You know the following –• General Systems had a levered beta of 1.09 prior to themerger. The firm has a market value of equity of $12 billion and$16 billion in debt outstanding.• FastWorks Software had a levered beta of 1.30 prior to themerger. The firm has a market value of equity of $6.00 billion and$6.00 billion in debt outstanding.If you were told that the combined firm’s levered beta will be1.270 after the acquisition, how much debt did General Systems useto acquire FastWorks? [You can assume that General Systems willassume Fastworks’ existing debt]. Both firms have a 40.00%Taxratea. debt to equity ratio after the merger(in decimal form)b. debt to capital after transactionc. dollar value of debt in the merged firmd. dollar value of debt in existing companiese. new debt issued to finance the transaction