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 25%. What would Bailey's beta be if it used no debt, i.e., what is its unlevered beta?
A. 0.60
B. 0.63
C. 0.66
D. 0.70
E. 0.73
Answer: E
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