Faris Currently Has a Capital Structure of 40 Percent Debt

Faris currently has a capital structure of 40 percent debt and 60 percent equity, but is considering a new product that will be produced and marketed by a separate division.The new division will have a capital structure of 70 percent debt and 30 percent equity.Faris has a current beta of 1.1, but is not sure what the beta for the new division will be.AMX is a firm that produces a product similar to the product under consideration by Faris.AMX has a beta of 1.6, a capital structure of 40 percent debt and 60 percent equity and a marginal tax rate of 40 percent.If Faris' tax rate is 40 percent, estimate the levered beta for the new product division?

A) 2.44
B) 1.14
C) 2.74
D) 3.88