XYZ Corp. which owns and operates grocery stores across the United States, currently has $100 million in debt and $150 million in equity outstanding. Its stock has a beta of 2.1. It is planning a leveraged buyout, where it will increase its debt-to-equity ratio of 7. If the tax rate is 40%, what will the beta of the equity in the firm be after the leveraged buyout?

Hint: find unlevered beta first, than find the levered beta again but with the new debt-to-equity ratio.

Select one:

a. 6.8

b. 7.8

c. 4.8

d. 8.8