Unlevered Cost of Capital

Unlevered Cost of Capital

A company’s unlevered cost of capital is its notional cost of financing assuming no debt i.e. the company is financed exclusively by equity. To calculate the unlevered cost of capital, an investor needs to add the risk-free rate of return to the unlevered beta (cf.) and multiply the result by the market risk premium (expected market return minus the risk free rate of return).

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