• Sharebar

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?

The WSO Advantage - Investment Banking

Financial Modeling Training

IB Templates, M&A, LBO, Valuation + Learn More.

IB Interview Prep Pack

30,000+ sold & REAL questions Learn More.

Resume Help from Actual IB Pros

Land More IB Interviews. Learn More.

Find Your Perfect IB Mentor

Realistic IB Mock Interviews. Learn More.

Comments (1)

  • guymanuzo's picture

    To unlock this content for free, please login / register below.

    Sign In with Facebook Sign In with Google

    Connecting helps us build a vibrant community. We'll never share your info without your permission. Sign up with email or if you are already a member, login here Bonus: Also get 6 free financial modeling lessons for free ($200+ value) when you register!

    The dragon dozes off in the spirit which is its dwelling.