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Hamada Equation Formula

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Leveraged Beta is a measure of a company's risk or volatility in relation to the overall market, taking into account the firm's use of financial leverage. Check FAQs

β L = β UL \cdot (1 + (1 - T %) \cdot R D/E)

β_L - Leveraged Beta?β_UL - Unleveraged Beta?T_% - Tax Rate?R_D/E - Debt to Equity (D/E)?

Hamada Equation Example

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Here is how the Hamada Equation equation looks like with Values.

Here is how the Hamada Equation equation looks like with Units.

Here is how the Hamada Equation equation looks like.

272.16 = 7.2 \cdot (1 + (1 - 0.08) \cdot 40)

272.16 = 7.2 \cdot (1 + (1 - 0.08) \cdot 40)

272.16 = 7.2 \cdot (1 + (1 - 0.08) \cdot 40)

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Hamada Equation Solution

Follow our step by step solution on how to calculate Hamada Equation?

FIRST Step Consider the formula

β L = β UL \cdot (1 + (1 - T %) \cdot R D/E)

Next Step Substitute values of Variables

∴

β L = 7.2 \cdot (1 + (1 - 0.08) \cdot 40)

Next Step Prepare to Evaluate

∴

β L = 7.2 \cdot (1 + (1 - 0.08) \cdot 40)

LAST Step Evaluate

∴

β L = 272.16

Hamada Equation Formula Elements

Variables

Leveraged Beta

Leveraged Beta is a measure of a company's risk or volatility in relation to the overall market, taking into account the firm's use of financial leverage.

Symbol: β_L

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Leveraged Beta

Unleveraged Beta

Unleveraged Beta is a measure of a company's risk or volatility in relation to the overall market, without taking into account the firm's use of financial leverage.

Symbol: β_UL

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Unleveraged Beta

Tax Rate

Tax Rate refers to the percentage at which a taxpayer's income or the value of a good or service is taxed.

Symbol: T_%

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Tax Rate

Debt to Equity (D/E)

Debt to Equity (D/E) shows the proportion of equity and debt a firm that shows the ability for shareholder equity to fulfil obligations to creditors in the event of a business decline.

Symbol: R_D/E

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Debt to Equity (D/E)

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How to Evaluate Hamada Equation?

Hamada Equation evaluator uses Leveraged Beta = Unleveraged Beta*(1+(1-Tax Rate)*Debt to Equity (D/E)) to evaluate the Leveraged Beta, The Hamada Equation formula is defined as a formula used in financial economics to estimate the leveraged beta of a leveraged firm. The leveraged beta reflects the risk of a firm's equity when it uses financial leverage (debt) to finance its operations. Leveraged Beta is denoted by β_L symbol.

How to evaluate Hamada Equation using this online evaluator? To use this online evaluator for Hamada Equation, enter Unleveraged Beta (β_UL), Tax Rate (T_%) & Debt to Equity (D/E) (R_D/E) and hit the calculate button.

FAQs on Hamada Equation

What is the formula to find Hamada Equation?

The formula of Hamada Equation is expressed as Leveraged Beta = Unleveraged Beta*(1+(1-Tax Rate)*Debt to Equity (D/E)). Here is an example- 272.16 = 7.2*(1+(1-0.08)*40).

How to calculate Hamada Equation?

With Unleveraged Beta (β_UL), Tax Rate (T_%) & Debt to Equity (D/E) (R_D/E) we can find Hamada Equation using the formula - Leveraged Beta = Unleveraged Beta*(1+(1-Tax Rate)*Debt to Equity (D/E)).

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Hamada Equation Formula

Hamada Equation Example

Hamada Equation Solution

Hamada Equation Formula Elements

Other formulas in Basics of Time Value of Money category

How to Evaluate Hamada Equation?

FAQs on Hamada Equation

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