Problem:
Your company has a debt to equity ratio equal to 2.5 and a constant debt policy. The company's debt is risky with a beta equal to 0.1, and the market cost of debt is 3%. The corporate tax rate is 15%, the risk free rate is 1% and the return on levered equity is 12%.
Required:
Question: What is the beta of levered equity?
Explain in detail and also show all workings.