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

Question

Quizplus · Accepted Answer

The Answer of 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

Bailey and Sons Has a Levered Beta of 1