Difference between revisions of "Hamada formula"

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* <math>{T_c}</math> is the corporate tax rate.
 
* <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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== 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.==
  
  

Revision as of 07:41, 25 August 2020

Levered Beta is the beta that reflects a capital structure that does include debt. The Unlevered Beta is the Beta of a company without any debt. Unlevering a beta removes the financial effects from leverage.



=

Where:

  • is the levered, published beta
  • is the companies debt
  • is the companies equity
  • is the corporate tax rate.

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.