Unleveraged beta

Unleveraged beta

The beta of an unleveraged required return (i.e., no debt) on an investment when the investment is financed entirely by equity.

Unleveraged Beta

A measure of an asset or company's volatility with respect to a market index when the asset or company has been financed entirely with equity. That is, the unleveraged beta helps determine the asset company's risk when it has no debt.
References in periodicals archive ?
Table 1 The unchanged WACC according to Modigliani and Miller's theory FCF 100 100 Perpetuity growth = g 3.00% 3.00% Risk free rate = r 2.00% 2.00% Market risk premium 7.00% 7.00% Unleveraged beta = [beta] * 0.90 0.90 Cost of debt Pretax cost of debt 3.40% 5.50% Post tax @ 36.1% 2.17% 3.51% Beta of the debt 0.20 0.50 Leveraged beta = [beta] 1.20 1.07 Cost of equity = k 10.38% 9.49% WACC = K 7.11% 7.11% P 8.30% 8.30% Adjusted cost of capital 7.11% 7.11% EV 2,509 2,509 Debt 1,000 1,000 Equity 1,509 1,509 For a FCF which is equal to 100, a risk free rate of 2%, a market risk premium of 7% and an unleveraged beta of 0.9, 2 assumptions regarding the pretax cost of debt are taken into account: 3.40%, based on a debt's beta of 0.20 and 5.50% based on debt's beta of 0.50.