Simpson Inc

question 35

Multiple Choice

Simpson Inc.is considering a vertical merger with The Lachey Company.Simpson currently has a required return of 11%,while Lachey's required return is 15%.The market risk premium is 5% and the risk-free rate is 5%.Assume the market is in equilibrium.If Simpson is going to make up 67% of the new firm (and Lachey will comprise the remaining 33%) ,what will be the beta of the new merged firm? There will be no additional infusion of debt in the merger.

• A)1.46
• B)1.54
• C)1.61
• D)1.69
• E)1.78

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Definitions:

Achievement Gap

The observed disparity in academic performance between groups of students, especially as related to race, ethnicity, and socioeconomic status.

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The numerical outcomes or results of mathematical tests or assessments, indicative of a person's proficiency in mathematics.

Jim Crow South

Refers to the period of racial segregation in the Southern United States enforced by laws that marginalized African Americans and denied them rights and equality.