Which equation is used to calculate levered beta?

Levered beta is calculated to reflect the risk of a company's equity considering its debt levels. The correct equation stipulates that levered beta is equal to unlevered beta multiplied by the factor of [1 + debt/equity ratio * (1 - tax rate)]. This formula adjusts the unlevered beta, which represents a firm's risk without debt, to account for the additional financial risk introduced by leverage.

When a company uses debt, it increases its risk profile because debt obligations must be met regardless of the company's performance. Equity holders require a higher return to compensate for this added risk. By incorporating the debt/equity ratio and tax effects into the levered beta calculation, the equation captures the increased volatility of returns on equity due to the presence of debt financing.

The other options represent different concepts that do not accurately describe how to calculate levered beta. They focus on separate financial metrics or relationships that do not include the necessary adjustments for debt and its impact on risk. Thus, option B correctly illustrates the relationship between levered beta, unlevered beta, and the effects of leverage on risk.