Levered Beta of a stock is a measure of the risk associated with the stock in relation to the volatility of the stock market.  Levered beta measures the systematic risk associated with the business and the industry within which it operates and covers risks such as economic downturns, political upheavals, natural disasters, etc. These are risks over which investors and firms have no control. As such risks are inherent in the entire market, firms and investors cannot mitigate the risk by diversifying their portfolios. The computation of the levered beta includes the capital structure or leverage of the business entity and measures the value of debt of a firm in relation to the value of equity in determining the exposure risk for investors buying its stocks.  The higher the debt, the higher the systematic risk represented by the levered beta and vice versa. In business valuation analytical work, the levered beta is included in the indicators in the Capital Asset Pricing Model (CAPM) for the computation of the cost of equity. The CAPM is a very important model in business valuation as the foundation of the computation of the Weighted Average Cost of Capital (WACC) which is the discount rate applied to convert future cash flows to value. The levered beta, when multiplied by the market risk premium results in the equity risk premium which when added to the market value of debt generate the WACC or the discount rate. The levered beta is also referred to as “Equity Beta and “Undiversifiable Beta”. The cost of equity and the equity risk premium are computed as: Cost of Equity = Rf + bx(MRP) Where: Rf = Risk-Free Rate bx = Beta MRP = Market Risk Premium (the return on the stock exchange over a long period) bx(MRP) = Equity Risk Premium