unlevered beta
Definition
The beta of a company after subtracting out the impact of its debt obligations. Unlevered beta removes the effects of the use of leverage on the capital structure of a firm, since the use of debt can result in tax rate adjustments that benefit a company. Removing the debt component allows an investor to compare the base level of risk between various companies. It is calculated by dividing the levered beta by [1 + (1 - tax rate) x (D / E)], where D/E is the debt/equity ratio.
Use unlevered beta in a sentence
“ John and Barry used a UNLEVERED BETA to ease the tax burden for the company they are gainfully employed . ”
“ After everything was over, we still had some unlevered beta and that was good and it made us feel good about ourselves. ”
“ If you are trying to find out how much you should budget for your next project you should calculate your unlevered beta. ”
