The Beta of Sanafil Is 1

question 87

Multiple Choice

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? MV_S = $40(10,000,000) = $400,000,000
MV_M = $60(2,000,000) = $120,000,000

• A) 1.00
• B) 1.14
• C) 1.05
• D) 1.16

---

Definitions:

Fund Raising

The process of gathering voluntary contributions of money or other resources, typically for non-profit organizations or to finance a particular project or venture.

Tender Their Shares

The act of a shareholder submitting their stocks in response to a buyout offer.

Initial Public Offering

The process by which a private company offers shares of stock to the public for the first time.

Capital Contributions

Financial or other assets given to a company by its owners or shareholders to increase its equity or meet its financing needs.