Bailey and Sons Has a Levered Beta of 1

question 14

Multiple Choice

Bailey and Sons has a levered beta of 1.10,its capital structure consists of 40% debt and 60% equity,and its tax rate is 40%.What would Bailey's beta be if it used no debt,i.e. ,what is its unlevered beta?

• A) 0.64
• B) 0.67
• C) 0.71
• D) 0.75
• E) 0.79

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Definitions:

Withdrawal

A set of symptoms that occur upon the discontinuation or decrease in intake of a substance that has been used regularly or in psychological contexts, the process of becoming emotionally detached.

Alcohol Dependence

A medical condition characterized by an impaired ability to stop or control alcohol use despite adverse social, occupational, or health consequences.

Tremors

Involuntary, rhythmic muscle movements involving oscillations or shaking of one or more body parts.

Intoxicated

The condition of having physical or mental control markedly diminished by the effects of alcohol or drugs.