As of September 2012, GOOG, has no debt. Suppose the firm's managers are considering issuing zero-coupon debt due in 16 months with a face value of 163.5$ and using the proceeds to pay a special dividend. Google currently gas a market value of 229.2 billion and the risk free rate is 0.25%. Using an implied volatility of 38.60% answer the following:
a) If Google's current equity beta is 1.20 estimate Google's equity beta after the debt is issued.
b) Estimate the beta of the new debt.