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Using The Hamada Equation To Find Unlevered Beta

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Harley Motors has $ 10 million in assets, which were financed with $ 2 million of debt and $ 8 million in equity. Harley's beta is currently 1.2, and its tax rate is 40%. Use the Hamada equation to find Harley's unlevered beta, bU.

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Solution Summary

This solution describes the Hamada equation and illustrates its use to convert levered (or leveraged) beta to unlevered (unleveraged) beta.

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The conversion from unlevered beta to levered beta is made to account for the risk ...

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