Question of the day
2026-09-24
DCF & WACC
What's the difference between levered and unlevered beta, and why unlever it?
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
Levered (equity) beta reflects both business risk and financial risk from leverage. Unlevered (asset) beta strips out the effect of debt. You unlever comparable companies' betas, take a median to isolate pure business risk, then relever at the target's own capital structure to get a beta for its cost of equity.
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