Corporate Finance: Instructor\'s Manual Applied Corporate Finance

Aswath Damodaran 141

The Disney/Cap Cities Merger: Pre-Merger

Disney:

! Beta = 1. 15

! Debt = $ 3 , 186 million Equity = $ 31 , 100 million Firm = $ 34 , 286

! D/E = 0. 10

ABC:

! Beta = 0. 95

! Debt = $ 615 million Equity = $ 18 , 500 million Firm= $ 19 , 115

! D/E = 0. 03

These are the betas of the firms at the time of Disney’s acquisition. The tax rate

used for both betas is 36%.