Unlevered Beta Calculator

Unlevered beta, also called asset beta, removes the financial-leverage effect from observed equity beta so you can compare business risk across firms with different debt loads. Valuation teams unlever peer betas, average them, and relever at the target capital structure when they build a CAPM cost of equity. The unlevered beta calculator applies the Hamada relationship: levered beta divided by one plus one-minus-tax-rate times the debt-to-equity ratio. With levered beta 1.20, a 21% tax rate, and debt-to-equity of 1.00, unlevered beta is 1.20 ÷ [1 + (1 − 0.21) × 1] = 1.20 ÷ 1.79 ≈ 0.67. With levered beta 1.50, 25% tax, and D/E of 0.50, unlevered beta is 1.50 ÷ 1.375 ≈ 1.09. With levered beta 1.00, 21% tax, and no debt, unlevered beta equals 1.00 because there is no leverage to remove. Debt-to-equity should be the same definition used in the peer set, typically interest-bearing debt divided by market equity. Mixing book equity in one firm with market equity in another distorts the average. The tax rate is a percent, so 21 means 21%. A statutory federal rate ignores state tax and non-cash ETR effects; many practitioners use a marginal rate rather than a trailing effective rate. Hamada assumes debt beta is zero and that tax shields are as risky as debt. Firms with cash-rich net cash, convertible notes, or operating leases classified as debt will not match that textbook world. The calculator does not relever the result. Recalculate when you replace a noisy regression beta or when net debt changes, and document the D/E date next to the asset beta you use in a DCF. Peer betas should come from the same look-back window and the same market index. Blending a two-year weekly beta with a five-year monthly beta, then unlevering each with a different D/E date, produces an average that is hard to defend. Prefer a single recipe for every comparable, drop obvious outliers, and say whether you used raw or adjusted beta. The unlevered figure is an input to cost of capital, not a trading signal.