Beta, CAPM
Hi guys, need some help please,
How do you find the beta for a company. Some sources say bloomberg has the industry beta. But then how do you unlever and relever it if you don't know the market debt and equity?
Thank you.
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You're right, you look up the Beta for each Comparable Company (usually on Bloomberg), un-lever each one, take the median of the set and then lever it based on your company’s capital structure. Then you use this Levered Beta in the Cost of Equity calculation. To un-lever the comps' betas you use: Levered Beta / (1 + ((1 - Tax Rate) x (Total Debt/Equity))). Find the median of those values then re-lever the beta using Un-Levered Beta x (1 + ((1 - Tax Rate) x (Total Debt/Equity))).
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