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| − | [[Levered Beta|Levered Beta]] is the beta that reflects a capital structure that does include debt.
| + | Hamada formula |
| − | The [[Unlevered Beta|Unlevered Beta]] is the [[Beta|Beta]] of a company without any debt. Unlevering a beta removes the financial effects from leverage.
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| − | <html><img src = "/static/files/MBI/Module%2012/leveredbeta.PNG" width="600"/></html>
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| − | <math> \text{Unlevered beta}</math> = <math>\frac{B^L}{1+(1-T_c)*\frac{D}{E}}</math>
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| − | Where:
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| − | * <math>{B^L}</math> is the levered, published beta
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| − | * <math>{D}</math> is the companies debt
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| − | * <math>{E}</math> is the companies equity
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| − | * <math>{T_c}</math> is the corporate tax rate.
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| − | ==+ The point of the unlevered beta is to ''''remove'''' the debt risk from a publicly known company in a sector comparable to your own company ('unlever the beta') add your own debt risk and 'lever' the beta.==
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| | [[Category:finance]] | | [[Category:finance]] |
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