Unlevered beta compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta of a company without any debt. Unlevering a beta removes the effect of debt on beta. It is a purer form of beta because it indicates the risk arising from the operations of the entity. This number provides a measure of how much systematic risk a firm’s equity has when compared to the market. Unlevering is also done to compare companies which are in competition so we can use peer method to calculate WACC. It must be noted that an unlevered beta must eventually be “relevered” because a company with higher debt is riskier than a company with lower debt
