Azalea Inc wants to estimate a beta for their privately held company. Since they aren$$t publicly

traded, they cannot calculate beta based on a regression of their stock returns relative to proxy

market returns. As such, beta will need to be estimated relative to peer competitors. Azalea

has identified the following three competitors: Redbud Industries, Holly Enterprises, and

Firethorn Ltd$.$

Azalea has the following: tax rate $=22\%$; weight of debt $=83\%$; weight of equity $=17\%.$

Below are the weights of debt and equity, tax rates, and betas of the $3$ peers.

Redbud Industries

$$ Weight of debt $=59\%$

$$ Weight of equity $=41\%$

$$ Tax rate $=20\%$

$$ Beta $=0\mathrm{.}48$

Holly Enterprises

$$ Weight of debt $=69\%$

$$ Weight of equity $=31\%$

$$ Tax rate $=24\%$

$$ Beta $=0\mathrm{.}52$

Firethorn Ltd$.$

$$ Weight of debt $=71\%$

$$ Weight of equity $=29\%$

$$ Tax rate $=21\%$

$$ Beta $=0\mathrm{.}70$

For Azalea to estimate a beta they will have to:

$1.$ Unlever the betas of the $3$ peer firms using equation $15-12($in the text and the module $8$

supplement$)$

$2.$ Take an average of the $3$ unlevered betas.

$3.$ Re$-$lever the average beta based on the division$$s weights of equity and debt as well as

the tax rate. They can do this by using equation $15-11$a $($in the text and the module $8$

supplement$).$

Based on the information above, what is the beta that Azalea should use for the firm?