Counts Accounting has a beta of 1.20. The tax rate is 35%, and Counts is financed with 55% debt. What is

Counts Accounting has a beta of 1.20. The tax rate is 35%, and Counts is financed with 55% debt. What is Counts' unlevered beta? Round your answer to two decimal places.

wd = 0.55, then ws = 1 – 0.55 = 0.45. So D/S = wd/we = 0.55/0.45.

bU = b/[1 + (1-T)(D/S)] = 1.20/[1 + (1-0.35)(0.55/0.45)] = 0.67.