What is Unlevered Beta ?
Unlevered beta, also known as asset beta, is a measure of the systematic risk of a company's assets, independent of its capital structure. It reflects the volatility of a company's equity relative to the overall market, assuming the company has no debt. This metric is crucial for comparing the intrinsic risk of firms within the same industry, as it removes the effects of leverage (debt), thereby providing a clearer picture of the business risk. Investors and analysts use unlevered beta to assess the risk of a company's core operations and to make more accurate comparisons between companies with different debt levels. Calculating unlevered beta involves adjusting the company's levered beta (which includes debt) by removing the effects of financial leverage. This adjustment helps in understanding the pure business risk without the influence of the company’s financial structure.
How to Calculate Unlevered Beta?
Unlevered Beta calculator uses Unlevered Beta = Levered Beta/(1+((1-Tax Rate)*(Debt/Equity))) to calculate the Unlevered Beta, The Unlevered Beta measures a company's market risk without considering its debt, indicating the volatility of its equity relative to the overall market. Unlevered Beta is denoted by β_{UL} symbol.
How to calculate Unlevered Beta using this online calculator? To use this online calculator for Unlevered Beta, enter Levered Beta (β_{L}), Tax Rate (t), Debt (D) & Equity (E) and hit the calculate button. Here is how the Unlevered Beta calculation can be explained with given input values -> 0.622159 = 0.73/(1+((1-0.35)*(22000/10000))).