If a firm is in a zero tax bracket,then the levered and unlevered betas will be identical no matter what the debt-equity ratio.

Question

Quizplus · Accepted Answer

The levered beta takes into account the debt-equity ratio and the financial risk associated with leverage, even if the tax rate is zero. Levered beta increases with higher debt levels due to the increased financial risk, making it different from the unlevered beta, which does not consider debt.

If a Firm Is in a Zero Tax Bracket,then the Levered