2N5.3
3. Computer Associates is trying to buy Computer Sciences. Assume:
CA has an equity beta of 1.5 and a debt beta of 0.2. It has $8bn
in equity and $2bn in debt. CS has an equity beta of 1.6 and a
debt beta of 0.24. It has $6bn in equity and $2bn in debt. The
risk free rate is 3% and the expected return on the market is 12%.
What discount rate should CA use to determine what price to pay
for CS? (3 pts)