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Problem:

ABC is a small software company with 60 million shares outstanding, trading at $ 10 a share, and $ 400 million in debt. The current beta is 1.96. The tax rate for the company is 40%. Now assume that ABC is awarded a court judgment of $ 500 million from XYZ for violation of software copyrights. ABC plans to use this money to pay a dividend of $250 million & pay off $250 million of debt.

Requirement:

Question: Estimate the levered beta for ABC after these transactions.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169786

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