Levered Beta

Also called equity beta. Business risk plus the extra risk that borrowing imposes on the equity. What you actually put into CAPM. Relever an unlevered beta at the capital structure of the company you are valuing, not the peer set’s, or the beta and the WACC weights disagree with each other. Work through it interactively in the Beta Refresher lab at /labs/beta.

Practise it

A slope, not a speed. Generate a series with a beta you choose, regress it back, and see how far one estimate lands from the truth. Raw, adjusted, unlevered, bottom-up.

Open Beta Refresher, free, 10 min

Where Levered Beta comes up

How to Build a DCF Model: Build Order, Terminal Value and the Sanity ChecksA DCF is 70% terminal value and 100% assumptions. Build it so both can be defended.Read the guide — 12 min DCF Interview Questions: The Ones That Actually Come UpFrom "walk me through a DCF" to the follow-ups that catch people who only memorised the steps.Read the guide — 8 min

Keep reading

DCF interview questions guide

Related Valuation terms

Unlevered Beta Bottom-Up Beta Raw Beta Hamada Equation Adjusted Beta Synthetic Credit Rating

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