Hi! Can somebody please explain in levered beta we use what kind of tax rate?Effective?
We should use the tax rate that is lying inside the current tax bracket for the company.
The tax rate for companies can increase if revenues increase (the company is bigger and bigger), so there are tax brackets for companies.
A small cap company could current be taxed using a tax rate of 25% for example, but a big corporation could be taxed at 40%.
The marginal tax rate.
2019 Level I CFA curriculum, volume 4, reading 35, p. 96.