a) You are trying to estimate the beta of a private firm that manufactures home appliances. You have managed to obtain betas for publicly traded firms that also manufacture home appliances.

Firm	Beta	Debt Shs000	MV of Equity Shs000
LG	1.40	2,500	3,000
Mika	1.20	5	200
Ramtons	1.20	540	2250
Von Hotpoint	0.70	8	300
Heir	1.50	2900	4000

The private firm has a debt equity ratio of 25%, and faces a tax rate of 40%. The publicly traded firms all have marginal tax rates of 40%, as well.

i) Estimate the beta for the private firm.

ii) What concerns, if any, would you have about using betas of comparable firms?

b) Discuss the difference between Capital Market Line and Securities Market Line?