How to calculate unlevered beta?

Firstly,determine the levered beta of the subject company. Usually,the levered beta of publicly listed companies can be derived from the market.

  • Next,collect the value of the debt of the company which is available from its balance sheet.
  • Next,determine the value of the company’s equity-based on the market capitalization or the trading value of the stock times the number of shares.
  • Next,figure out the effective tax rate applicable to the company either from its income statement or use the corporate tax rate of the country of incorporation.
  • Next determine the leverage of the company by dividing the debt (step 2) by the equity (step 3) of the company. Debt-to-Equity Ratio = Debt/Equity
  • Finally,the formula for unlevered beta can be derived by dividing the levered beta (step 1) by a factor of 1 plus the product of (1 – tax
  • What is beta important use of calculations?

    Beta is a component of the capital asset pricing model (CAPM), which is used to calculate the cost of equity funding. The CAPM formula uses the total average market return and the beta value of the stock to determine the rate of return that shareholders might reasonably expect based on perceived investment risk.

    How to relever beta?

    Find out the Unlevered Beta

  • Find out the tax rate for the stock. The tax rate is represented by t.
  • Find out the total debt and equity value. The formula for calculating total debt is: Debt = Short term debt+Long term debt
  • Calculation using the formula:
  • How to calculate Beta using the market return?

    Top 3 Formula to Calculate Beta Covariance/Variance Method. To calculate the covariance, we must know the return of the stock and also the return of the market, which is taken as a benchmark value. By Slope Method in Excel. We can also calculate Beta by using the slope function in excel. Correlation Method. Beta can also be calculated using the correlation method.