Unlevered Beta Calculator
The Unlevered Beta Calculator is a financial tool used to determine the risk of a company's equity without taking its debt into account. This calculation is useful for investors and analysts to compare companies within the same industry, as it removes the effect of financial leverage. It uses the formula: Unlevered Beta = Levered Beta / (1 + ((1 - Tax Rate) * (Debt/Equity))). This tool simplifies the calculation process by automating the formula.
How to Use the Calculator
To use the Unlevered Beta Calculator, follow these steps: 1. Input the Levered Beta of the company. 2. Enter the Tax Rate as a percentage. 3. Provide the Debt-to-Equity ratio of the company. 4. Click on the "Calculate" button to see the result. 5. Use the "Clear" button to reset the inputs.
Unlevered Beta Calculator
Frequently Asked Questions
1. What is Unlevered Beta?
Unlevered Beta measures a company’s market risk independent of its debt. It helps investors understand intrinsic risk.
2. Why is Unlevered Beta important?
Unlevered Beta is crucial for comparing the risk of companies with varying capital structures.
3. How is Levered Beta different?
Levered Beta incorporates the effect of debt, while Unlevered Beta removes it to focus solely on equity risk.
4. Can Unlevered Beta be negative?
Yes, if the Levered Beta is negative, the Unlevered Beta can also be negative, indicating inverse market correlation.
5. What is the formula for Unlevered Beta?
Unlevered Beta = Levered Beta / (1 + ((1 - Tax Rate) * (Debt/Equity))).
6. What inputs are needed for this calculation?
You need Levered Beta, Tax Rate, and Debt-to-Equity Ratio for calculating Unlevered Beta.
7. Is Unlevered Beta the same as Asset Beta?
Yes, Unlevered Beta is also referred to as Asset Beta in financial analysis.
8. What does a high Unlevered Beta indicate?
A high Unlevered Beta signifies higher market risk associated with the company’s operations.
9. Can this calculator be used for all industries?
Yes, the Unlevered Beta formula is universally applicable across industries.
10. What are the limitations of Unlevered Beta?
Unlevered Beta does not account for other risk factors like macroeconomic or industry-specific risks.