Beta, Leverage, and the Cost of Capital

English , Spanish

  • Reference: FN-616-E

  • Number of pages: 8

  • Publication Date: Nov 7, 2013

  • Source: IESE (España)

  • Type of Document: Technical Note

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Description

This note briefly discusses the versatile and widely-used technique of levering and unlevering beta, which has many and varied applications in finance. The note addresses the intuition and relevant mathematical expressions of this technique, and illustrates its usefulness with a practical application focusing on Starbucks.

Learning Objective

Necessary to illustrate the technique of levering and unlevering beta, which has multiple uses in finance.

Keywords

beta CAPM. cost of capital cost of equity Leverage