Systematic (non-diversifiable) risk relative to the market. Levered beta β_L — observed from stock returns — captures both business risk and financial risk from leverage. To compare across peers with different capital structures, unlever: β_U = β_L / left[1 + (1-t)· tfracDEright]. Then relever at the target's capital structure: β_L = β_U · left[1 + (1-t)· tfracDEright]. Used as the CAPM input for the cost of equity.