Help beta working- question 9 Pre Sept mock exam

Hi,

I am struggling to understand how the answer for Step 1 in this question is calculated.

The answer I get is “2” for step one. My working is from the inside brackets to outside brackets and then x / + – , could you please help with where I’m going wrong, I can’t get the answer 1.304.

Question:

South Co is a private company that wants to establish its cost of equity in order to evaluate a new investment proposal. North Co is a listed company that is very similar to South Co.
South Co has a debt:equity ratio of 1:3
North Co has a debt:equity ratio of 1:4
North Co’s equity beta is 1.50
Corporation tax is 40%
Calculate an appropriate beta for South Co to use in its cost of equity calculation to 2 decimal places.

Answer:

Step 1 – estimate an ungeared (asset) beta from North
Co’s equity beta
Assuming a debt beta of zero:
Ba = Be (Ve/(Ve+ Vd(1-T))
Ve = value of equity
Vd = Value of debt
T = rate of tax
Ba = 1.50 x 4/(4 + 1 (1-0.40)) = 1.304

Step 2 – estimate the geared (equity) beta for South Co
Be = Ba (Ve+ Vd(1-T)Ve)
= 1.304 × (3+1 (1-0.40)/3)
=1.56