• anonymous
Hi, do you know how tocalculate average beta from betas for the previous 5 years? Stock prices are not given.
  • Stacey Warren - Expert
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  • chestercat
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  • anonymous
if its about a company that is not listed in the stock market, then you have to apply the hamada model, i explain you: First Step. Find a comparable stock which is listed and take the beta, this beta is the levered Second Step: Remove the capital structure of this stock ( this is the main reason of risk of a company how indebted is) applying the next formula: B(u): B(L) / (1+( D/E ) x (1-t)) where: B(U): Beta without debt, B(L): Beta of the listed comparable company(you can find on the net) D. Debt E: Equity t: marginal tax 3 Step: then you have the beta without debt w do the assumption that the beta(U) of the company that we have to value is the same as the beta of listed comparable company, so to get the B(L) WE HAVE TO APPLY the capital structure of the company that we are going to value, applying. B(L): B(U) x (1 + D/E x (1-t) ) hope you help

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