Finance

Unlevered vs. Levered Beta (Hamada Equation) Calculator

Re-lever an unlevered beta to a target capital structure.


Unlevered vs. Levered Beta (Hamada Equation) Calculator

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Comparable companies rarely share your target company’s exact capital structure — the Hamada equation lets analysts strip out a comparable’s own leverage, then re-apply the target’s leverage instead.

How it works

Multiplying the unlevered beta by one plus the after-tax debt-to-equity ratio gives the levered beta — showing how much more volatile the equity becomes once leverage is added back in.

What this does not include

This does not include the separate step of first *unlevering* a comparable company’s own observed beta (dividing by the same 1 + after-tax D/E factor) — this calculator assumes you already have an unlevered beta ready to re-lever to a new target structure.

How to use this calculator

  1. Enter the unlevered beta, tax rate, and target debt-to-equity ratio.

Frequently asked questions

Why do valuation analysts unlever and re-lever beta at all?

Because observed (levered) betas from comparable public companies reflect each company’s own specific capital structure — unlevering strips that out, and re-levering applies the target’s actual (often quite different) structure instead.

Why does a higher tax rate reduce the impact of leverage on beta?

Because interest is tax-deductible — a higher tax rate means more of the “cost” of debt is offset by tax savings, softening how much leverage actually amplifies equity risk in the formula.

Is the Hamada equation the only way to adjust for leverage?

No — it’s the simplest, most widely taught version; more elaborate models account for the riskiness of debt itself (assuming debt beta isn’t exactly zero), which the classic Hamada equation ignores.

Important: This is general information, not financial advice. Figures are estimates, and your lender or provider decides the real numbers. Check with a qualified adviser before acting on them.

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Written by

M. Whitfield

Personal finance writer

M. Whitfield writes the personal finance calculators, covering loans, mortgages, savings, tax and investment maths. The focus is on showing exactly which number goes into a formula and which assumptions a result depends on, so readers can tell when a figure applies to their situation and when it does not. Every finance page states what it does not account for as plainly as what it does.

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A. Whitfield-Reyes

Calculator reviewer — finance

A. Whitfield-Reyes reviews the finance calculators, checking compounding conventions, rate-period alignment, and whether each page is explicit about the costs and tax treatment it leaves out. Financial results are easy to state with false precision, so review focuses on whether the page makes its assumptions visible to a reader who is not looking for them.

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