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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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Solution Summary

Unleveraged beta is determined.

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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 ...

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