Levered Beta
Short definition
Levered beta is the equity beta after financial leverage has been mapped into shareholders’ systematic risk. CAPM Ke uses this beta; it is not the asset beta.
Detailed explanation
Hamada assumes debt beta is zero; that assumption weakens when Kd is high. Relever at target D/E, not at today’s D/E if the target differs.
Do not average peer levered betas raw; unlever, take a median, relever at your D/E.
Why it matters for the CFO
When capital structure changes, Ke changes. WACC’s equity leg moves through this channel.
How it is calculated
β_L = β_U × [1 + (1−T)×D/E] (Hamada, borç betası 0 varsayımı)
Variables in the formula
- β_L: Levered / equity beta
- β_U: Unlevered / asset beta
How to read it
Higher D/E lifts β_L and Ke. That is why “more debt always cuts WACC” can be wrong.
Numerical example
β_U 0.80, D/E 0.67, T 25% → β_L = 0.80 × [1 + 0.75×0.67] ≈ 1.20.
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Definitions are educational. They are not investment, credit or tax advice.