unlevering beta
Download
Skip this Video
Download Presentation
Unlevering Beta

Loading in 2 Seconds...

play fullscreen
1 / 3

Unlevering Beta - PowerPoint PPT Presentation


  • 200 Views
  • Uploaded on

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.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Unlevering Beta' - jana


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
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
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
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.
ad