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.
Formula
of Asset Beta
βa
= [Ve/Ve + Vd (1-t)] x βe
Ve=
Value of Equity
Vd=
Value of Debt
βe = equity Beta
