Hi there, and thank you in advance:

In L1 the formulas for unlevering and levering the betas included the tax shield (1-t). Now, for L2, the formulas don’t include (1-t).

Wiley states the following: “The unlevering and relevering formulas presented here are the ones found in most textbooks (without the tax shield I assume), where it is assumed that debt levels are constant. The formulas presented in the curriculum do not multiply the D/E ratio by (1-t) as they assume that debt levels **change over time**. On the eam, look out for the assumptions that applies; otherwise use the formula from the curriculum”.

First of all, Wiley contradicts itself in this sentence (or am I missing something?).

Second, so, I do not understand, do we multiply by (1-t) when we assume debt levels **change over time** or when **they do not change over time**.

Other question, the pure play method (the one above) is always used and **exclusively used** for thinly traded companies, private businesses and projects? Or can it be used in for very liquid companies; and if so, why would we use that method? I suppose that the beta in the OLS regression has already in itself the D/E ratio of the company within, right?

My question is that if, for example, I want to compute the beta from Apple Inc. and do it by the ordinary least squares (OLS) regression and by the pure play method, so my question is the following:

What happens to the beta of Apple if its D/E ratio changes? In the OLS mehtod, would the company’s beta adjusts itself without the analyst having to make nothing to adjust it, so the market adjusts it automatically? If I was computing the beta by the pure play method I would need to adjust it right?

Thank you very much!!!