Unleveraged beta
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Using 5 years of monthly returns, I have estimated the historical equity beta of a company to be 1. During this span of time, the company's debt structure was stable, with the total debt-to-total asset ratio averaging .40 & the company's tax rate was 46%.
Estimate the historical unlevered beta.
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Unleveraged beta is the beta of an unleveraged required return (i.e. no debt) on an investment when the investment is financed entirely by equity.
The beta of equity ...
Solution Summary
Unleveraged beta is determined.
$2.49