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In converting from levered->unlevered beta, is it standard practice in the industry to assume the debt beta is zero? In my finance class I've learned a formula like this:
Unlev Beta = D/V * Beta_d + E/V*Beta_e (lev beta)

Then online in interview prep materials/etc I see the formula for unlev beta assumes Beta_d = 0 and reworks the equation to be:

Unlev Beta = Lev Beta / (1 + D/E)

Is this an assumption that's made more often than not in the industry?

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  • guymanuzo's picture

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