Do It Yourself — Beta Calculation

Bottom-up beta calculator

Edit the yellow cells; the betas recalculate as you type. The maths runs entirely in your browser — nothing is saved or sent.

Essential inputs

Regression beta of the company Marginal tax rate % Average D/E over the regression period %

Re-estimation inputs (optional)

Current market value of equity $ Current book value of debt $ Average maturity of the debt (years) Interest expense, trailing 12 months $ Pre-tax market interest rate on the debt % Debt value of operating leases $

Your target

Target debt/equity ratio % Reset to the worked example

Results

Unlevered beta

—

Leverage stripped out — the business risk on its own.

Market value of debt

—

Debt valued as a bond: coupons plus principal, discounted.

Current D/E

—

At today's market values.

Beta at current D/E

—

Re-levered to today's actual capital structure.

Beta at your target D/E

—

What the beta becomes at the structure you expect.

Cost of capital (WACC)

Carries a levered beta through to a discount rate. Press Use the beta above to pull in the figure from the calculator, or type your own.

Cost of equity

Levered beta Use the beta above Risk-free rate % Mature-market equity risk premium % Country risk premium % CRP exposure (λ) %

Cost of debt & weights

Default spread over the risk-free rate % Marginal tax rate % Market value of equity $ Market value of debt $

Results

Cost of equity

—

Rf + β × ERP + λ × CRP

After-tax cost of debt

—

(Rf + spread) × (1 − t)

Weights (E / D)

—

At market values.

WACC

—

The discount rate for firm-level free cash flow.

A do-it-yourself bottom-up beta worksheet. Enter your company’s figures in the yellow cells and read three betas: the unlevered beta (leverage stripped out), the current beta at today’s market debt ratio, and the levered beta at whatever capital structure you expect. Method: NYU Stern (Damodaran). The worksheet below is filled with a worked example — for a live version that recalculates as you type, open the interactive calculator.

▶  Open the interactive calculator ↗Edit the yellow cells and the three betas recalculate instantly. The maths runs in your browser — nothing is saved or sent.

yellow = you enter this · slate = computed for you · blue = output. Cell references (E3, E17…) mirror the source spreadsheet.

The formulas behind the three outputs

Unlevered beta (E17) — strip the regression-period leverage out of the observed beta:
β_u = β / (1 + (1 − tax) × avg D/E)

Market value of debt (E12) — treat total debt as one coupon bond — interest as an annuity plus principal, discounted at the market rate:
MV debt = interest × [1 − (1+K_d)⁻ⁿ] / K_d + book debt / (1+K_d)ⁿ

Current beta (E18) — re-lever at today’s market D/E, where current D/E = (MV debt + leases) / MV equity:
β_current = β_u × (1 + (1 − tax) × current D/E)

Levered beta (E19) — re-lever at the D/E you expect:
β_levered = β_u × (1 + (1 − tax) × target D/E)

For educational and illustrative use; not investment advice. See our Disclaimer.