Sinaloa Appliance, Inc., a private firm that manufactures home appliances, has hired you to estimate the companys
Question:
Sinaloa Appliance, Inc., a private firm that manufactures home appliances, has hired you to estimate the company’s beta. You have obtained the following equity betas for publicly traded firms that also manufacture home appliances.
($ millions)
Firm Beta Debt Market Value of Equity iRobot 0.99 $0 $2,740 Middleby’s 2.10 732 7,310 National Presto 0.12 0 739 Newell Brands 1.16 11,893 25,770 Whirlpool 1.69 4,470 13,560
a. Estimate an asset beta for Sinaloa Appliance.
b. What concerns, if any, would you have about using the betas of these firms to estimate Sinaloa Appliance’s asset beta?
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Mehwish Aziz
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ISBN: 9781260772364
13th Edition
Authors: Robert Higgins, Jennifer Koski, Todd Mitton
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