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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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