Hamada Equation

It is the mathematical correlation that calculates the levered beta for a company against unlevered beta, the tax rate, and the leverage.

The formula is used in different types of investment products and global investment solutions for portfolio management, to find asset class risk, liquidity capital structure, and others.

Financial risk can be influenced by business threats. The term shows debt or financial leverage on the risk coefficient of the firm.  

The equation can be used to get an in-depth analysis of the company’s cost of capital. It can show how additional aspects of financial leverage are related to the overall risk factors. 

Beta is the metric used to depict how much a system is risky. If it is elevated, it is considered risky to invest in such a proposal and financial backers should not be willing to get behind such a proposal, which does not operate on a financially sound plan.