What the Hell is "Levered Beta"?

CFA Level II
#1

It was in a Mock 2 question…any idea?

#2

Something from last year, not in scope this year? http://www.analystforum.com/phorums/read.php?12,707268,709179#msg-709179

#3

i vaguely remember this from last year. first you get a comparable beta and unlever it by dividing it by the after tax debt ratio. you then take the unlevered beta and multiply it by the after tax debt ratio of the project. or something like that. someone verify?

#4

I studies it when getting my MBA, so I remembered it, but it shouldn’t have been on the mock, since it is no longer part of LII curriculum.

#5

what’s the formula, smarshy?

#6

1st you unlever a known asset to discover the true beta: B (comparable) = Beta of comparable/ [1+((1-tax rate of comparable)x (Debt of Comparable/Equity of Comparable))] Then you relever the asset to reflect the project risk in question: B (project) = Beta of comparable * [1+((1-tax rate of project)x (Debt of Project/Equity of Project))]

#7

Jeez, I said I remember levered beta, I didn’t say I remembered the formula…I got my MBA in 2001 for Gods sake. I don’t even remember the name of the girl I was dating at the time, let alone formulas.

#8

Already now this is ridiculous. Not only does CFA repeat the same questions from last year but they don’t remove the ones that no longer are in the LOS. I’ve had it with them. Lets start our own Charter. It will be much cooler.