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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%.

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. 0.70

b. 0.73

c. 0.60

d. 0.66

e. 0.63

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