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?

Comments (1)


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

  • Facebook
  • Google Plus
  • LinkeIn
  • Twitter
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.

The WSO Advantage - Investment Banking

Financial Modeling Training

IB Templates, M&A, LBO, Valuation +

IB Interview Prep Pack

30,000+ sold & REAL questions.

Resume Help from Actual IB Pros

Land More IB Interviews.

Find Your Perfect IB Mentor

Realistic IB Mock Interviews.

What's Your Opinion? Comment below:

Login or register to get credit (collect bananas).
All anonymous comments are unpublished until reviewed. No links or promotional material will be allowed. Most comments are published within 24 hours.
WallStreet Prep Master Financial Modeling