16.

Currently, Hendrix Publishing's tax rate is 22%, its beta is 1.07, and it is financed using 39% debt and the remainder equity. The CFO is considering moving to a capital structure financed by 35% debt. If the risk-free rate is 3% and the market risk premium is 7%, what would be the new beta (rounded to two decimal places, e.g., 1.23) used in calculating the firm's cost of equity? Note that you must first find the unlevered beta prior to estimating the new beta.