Bailey and Sons Has a Levered Beta of 1

question 38

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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