The introduction also covers the debt tax shield. The following video goes takes an in depth look at levered and unlevered beta. So now you have, a Beta which includes BOTH business risk and financial risk. Use this future Debt/Equity Ratio and add it back into the Unlevered Beta, to come up with the LEVERED Beta for your company. You know what the company's future Debt to Equity Ratio will be (Capital Structure). Relever the Beta- You have your company (for example, a private company) that you want to calculate a Beta for.If you're still with me, now you need to do something with this Unlevered Beta (only business risk is included). This DOES NOT take into account how much debt a company has. Unlevered Beta- Beta that only measures the business risk of a company.In order to apply a Beta to a different company, you need to remove the Financial Risk component of the Beta, so that you are only left with the Business Risk Component of the Beta. So, a company with debt has a higher risk than a company with no debt because they have to divert some of their cash flows to paying the interest and eventually paying off the principal of the debt. The important distinction is the financial risk Financial risk is a company's capital structure, in other words, how much debt they have, or how leveraged they are. Business risk is essentially how the company will perform like sales, growth, i.e.

Levered beta measures both the business risk and the financial risk of the company.

Unlevered beta calculator