Unlevering beta l.jpg
This presentation is the property of its rightful owner.
Sponsored Links
1 / 3

Unlevering Beta PowerPoint PPT Presentation


  • 150 Views
  • Updated On :
  • Presentation posted in: General

Unlevering Beta. If debt has no market risk, you can unlever equity Beta (B L ) as follows: B u = B L / [ 1 + (1-t)(D/E) ] Where t is the tax rate and B L is the observable levered Beta of equity. Unlevering Beta.

Download Presentation

Unlevering Beta

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Unlevering beta l.jpg

Unlevering Beta

  • If debt has no market risk, you can unlever equity Beta (BL) as follows:

    Bu = BL / [ 1 + (1-t)(D/E) ]

  • Where t is the tax rate and BL is the observable levered Beta of equity.


Unlevering beta2 l.jpg

Unlevering Beta

  • If debt has market risk measured as Bd then can unlever equity Beta (BL)as follows:

    Bu = [ BL + Bd (1-t) (D/E)] / [ 1 + (1-t)(D/E) ]

  • Where t is the tax rate and BL is the observable levered Beta of equity.


Practice applications l.jpg

Practice Applications

  • Compute the Unlevered Beta for the stock you picked for our stock picking contest.

  • What would be the relevered Beta for a project that will use 70% debt?

    • Assuming Debt has no market risk

    • Assuming Debt has a Beta equal to .20

    • What would the WACC be for the project for each scenario mentioned above?

    • Check the answers of group members and have them check your answers. Call the professor if a consensus can’t be reached for a correct answer.


  • Login