How to Use Unlevered Beta Calculator
The Unlevered Beta Calculator removes leverage from a company’s observed beta so you can compare the pure business risk across firms with different capital structures.
- Pick an input mode — Use Amounts if you have debt and equity values; use Ratio if you already know D/E.
- Enter the levered beta — Typically taken from a regression against a market index over 2–5 years.
- Enter the tax rate — Use the marginal corporate tax rate applicable to the firm or peer set.
- Choose a display currency — The currency only affects how amounts are shown; the resulting beta is dimensionless.
- Read the Result — The Unlevered Beta Calculator displays the asset beta plus the denominator used in the Hamada formula.
Formula & Theory — Unlevered Beta Calculator
The Unlevered Beta Calculator is based on the Hamada equation:
βu = βl / [ 1 + (1 − T) × (D / E) ]| Symbol | Meaning |
|---|---|
| βl | Levered (equity) beta — what you observe in the market |
| βu | Unlevered (asset) beta |
| T | Marginal corporate tax rate |
| D | Market value of debt |
| E | Market value of equity |
The denominator increases with both leverage and (1 − tax rate). A higher tax shield reduces the impact of leverage on beta because some of the interest cost is recovered through tax savings.
To relever beta at a different capital structure, the inverse formula is used:
βl' = βu × [ 1 + (1 − T) × (D' / E') ]This relever step is essential when applying peer-group beta to a target company.
Use Cases for Unlevered Beta Calculator
- DCF valuation — Analysts unlever peers’ betas, average them, and relever at the target’s structure to compute cost of equity.
- M&A modelling — Investment bankers benchmark beta when targets and acquirers have very different leverage.
- Private company analysis — Since private firms have no traded beta, the only path is to start from listed comparables and adjust.
- Capital structure decisions — CFOs see how raising leverage would inflate their observed beta and cost of equity.
- Academic research — Researchers use unlevered beta to compare risk across industries on a like-for-like basis.
The Unlevered Beta Calculator is therefore a foundational step in any rigorous WACC or cost-of-equity workflow.