The Beta of Sanafil Is 1

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