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Company Beta Debt Equity D/E Black & Decker 1.4 2500 3000 0.8333333 Fedders 1.2 5 200 0.025 Maytag 1.2 540 2250 0.24 National Presto 0.7
Company | Beta | Debt | Equity | D/E | |
Black & Decker | 1.4 | 2500 | 3000 | 0.8333333 | |
Fedders | 1.2 | 5 | 200 | 0.025 | |
Maytag | 1.2 | 540 | 2250 | 0.24 | |
National Presto | 0.7 | 8 | 300 | 0.0266667 | |
Whirlpool | 1.5 | 2900 | 4000 | 0.725 | |
Private Firm's Leverage Ratio | 25% | ||||
Marginal Tax Rate | 40% |
You are valuing a private appliance manufacturing firm and need a beta estimate to find their cost of equity. You decide to instead use the comparable firm approach.
1) Use the average beta and average debt\equity ratio to find an unlevered beta for the peer group. Then, use this estimate of the unlevered beta to find the levered beta of your private company.
What are the three determinants of a firm's beta?
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