Notes on Equity and Asset Beta

kim226

Please confirm if this is right (if you are sure):
Unlevered Beta = Asset beta = [Levered Beta] [1/(1+D/E)]
Equity Beta = [Asset Beta] [(D+E)/E]

cjs238

Not sure where i saw this but an easier way to get the ratio’s is just take the inverse of equity to get leverage.
.3 equity .7 d
levered =1/.3= 3.33
d+e=are always going to one, lets to get confused about if you just 1/e

liquidity

Leverage = A/E
To unlever , divide
To re-lever , multiply

Analti_Calte

The equity and Alterntive Assets formulas are the freakin same thing. I’m taking it a step further, please follow me here:
Equity material says:
Unlevered = Levered (1/(1+D/E))
Levered = Unlevered (1 + D/E)
Alternative Asset section says:
Bequity = Bassets (1+ D/E)
So my deduction is that:
Levered = Bequity
Unlevered = Bassets
Thus, Unlevered Beta = Bassets = the beta of the firm independent of capital strucuture.

Analyze_This

correct… but easier to remember if you use either:
(1+D/E)
or
(D+E)/E
they give you the same result i’m pretty sure