Purpose
of Asset Beta
The asset beta is
calculated to determine the business risk only, financial risk element is
separated and it is determined that what would be the risk if the company has
no gearing. Asset beta shows the market risk suffered by all industry.
Asset beta shows that the
minimum risks will be suffered by the industry in any case irrespective of
level of gearing.
Formula
of Asset Beta
βa
= [Ve/Ve + Vd (1-t)] x βe
Ve=
Value of Equity
Vd=
Value of Debt
βe = equity Beta
Purpose of calculating
asset beta
Methods of calculating asset
beta
Formula for calculating
asset beta
Reason for calculating
asset beta
Asset beta formula
