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Glama

valuation-api

by io.finance-tools.valuation

calculate_unlever_beta

Read-onlyIdempotent

Unlever a (levered) equity beta to its asset beta using the Hamada formula — removing the financial-risk effect of debt so betas of companies with different capital structures can be compared. Formula: Beta(unlevered) = Beta(levered) / (1 + (1 - tax rate) x Debt/Equity). WHEN TO USE: Use when valuing a private company or a deal with a different capital structure than the public comparable — unlever the comps’ betas, average them, then relever at your target structure. WHEN NOT TO USE: Do NOT unlever with an inconsistent tax rate or debt/equity ratio — the result is only as clean as its inputs; for companies with significant non-debt liabilities consider a more advanced formula. BEHAVIOUR: pure deterministic calculation — no side effects, no network or storage access; idempotent and non-destructive; identical inputs always produce identical outputs. Division by zero, non-finite inputs, or mathematically undefined combinations return an explicit error instead of a number. RETURNS: JSON object { unlevered_beta: number (e.g. 0.85), inputs }. PARAMETERS: levered_beta (required): The observed (levered) equity beta of the comparable company, e.g. 1.2. Must be > 0. tax_rate (required): Corporate tax rate as a decimal between 0 and 1, e.g. 0.25 = 25%. debt_to_equity (required): Debt-to-equity ratio of the company whose beta is being unlevered (market values preferred), e.g. 0.5 = 0.5x. Must be >= 0.

Input Schema

TableJSON Schema
NameRequiredDescriptionDefault
tax_rateYesCorporate tax rate as a decimal between 0 and 1, e.g. 0.25 = 25%.
levered_betaYesThe observed (levered) equity beta of the comparable company, e.g. 1.2. Must be > 0.
debt_to_equityYesDebt-to-equity ratio of the company whose beta is being unlevered (market values preferred), e.g. 0.5 = 0.5x. Must be >= 0.

Schema Changelog

Changes observed during successful MCP inspections. Dates show when Glama detected each change.

  1. First observed

TDQS

A4.9/5.0
Behavior5/5

Does the description disclose side effects, auth requirements, rate limits, or destructive behavior?

The description adds substantial detail beyond the annotations: 'pure deterministic calculation — no side effects, no network or storage access; idempotent and non-destructive; identical inputs always produce identical outputs'. It also discloses error handling for edge cases like division by zero and non-finite inputs, which is important for a calculation tool.

Agents need to know what a tool does to the world before calling it. Descriptions should go beyond structured annotations to explain consequences.

Conciseness5/5

Is the description appropriately sized, front-loaded, and free of redundancy?

The description is well-structured with clear labeled sections: formula, WHEN TO USE, WHEN NOT TO USE, BEHAVIOUR, RETURNS, PARAMETERS. While longer than the minimal examples, every section earns its place and the core purpose is front-loaded in the first sentence.

Shorter descriptions cost fewer tokens and are easier for agents to parse. Every sentence should earn its place.

Completeness5/5

Given the tool's complexity, does the description cover enough for an agent to succeed on first attempt?

For a deterministic 3-parameter calculation, the description covers the formula, use cases, exclusions, parameter constraints, return format, and edge-case behavior. It also differentiates from the relever_beta sibling. Nothing an agent needs to invoke this tool correctly is missing.

Complex tools with many parameters or behaviors need more documentation. Simple tools need less. This dimension scales expectations accordingly.

Parameters4/5

Does the description clarify parameter syntax, constraints, interactions, or defaults beyond what the schema provides?

Schema coverage is 100% and the parameter section largely repeats the schema, so the baseline is 3. However, the description adds practical context such as 'market values preferred' for debt_to_equity and ties each parameter to the Hamada formula with concrete examples, which enhances semantic understanding.

Input schemas describe structure but not intent. Descriptions should explain non-obvious parameter relationships and valid value ranges.

Purpose5/5

Does the description clearly state what the tool does and how it differs from similar tools?

The description opens with a specific verb and resource: 'Unlever a (levered) equity beta to its asset beta using the Hamada formula'. It clearly distinguishes the tool from its siblings, especially calculate_relever_beta, by explaining the direction of the transformation and the goal of comparability across capital structures.

Agents choose between tools based on descriptions. A clear purpose with a specific verb and resource helps agents select the right tool.

Usage Guidelines5/5

Does the description explain when to use this tool, when not to, or what alternatives exist?

Explicit WHEN TO USE and WHEN NOT TO USE sections provide direct guidance. The description explains the typical workflow ('unlever the comps’ betas, average them, then relever at your target structure') and gives an exclusion condition with an alternative ('for companies with significant non-debt liabilities consider a more advanced formula').

Agents often have multiple tools that could apply. Explicit usage guidance like "use X instead of Y when Z" prevents misuse.

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TDQS

A4.6/5.0
Disambiguation5/5

Each tool maps to a distinct financial formula or calculation, and the when-to-use/when-not-to-use guidance cleanly separates closely related cash-flow metrics like NPV, IRR, and MOIC as well as CAPM, WACC, and DCF. There is no pair of tools that appears to perform the same operation.

Naming Consistency4/5

The overwhelming majority of tools follow a consistent calculate_<metric> snake_case pattern with descriptive names. irr_sensitivity breaks the pattern by omitting the calculate_ prefix, and mixing expanded names like cost_of_equity with abbreviations like wacc and moic is a minor deviation.

Tool Count5/5

Twelve tools is well within the ideal range for a focused financial-calculations server. Each tool covers a distinct valuation, discount-rate, or return-metric need without redundancy, so the count feels appropriately scoped.

Completeness4/5

The tool set covers the core valuation workflow: cost of equity, beta unlevering/relevering, WACC, DCF, enterprise-value multiples, and investment return metrics. It lacks a reverse equity-value calculation and an equity-side multiple like P/E, but those are workable gaps rather than severe dead ends.

Resources