Consider the following airline industry data from mid-2009: a. Use the estimates in table to estimate the debt beta for each firm (use an average if multiple ratings are listed). b. Estimate the asset beta for each firm. c. What is the average asset beta for the industry, based on these firms? a. Use the estimates in table to estimate the debt beta for each firm (use an average if multiple ratings are listed). The beta of the debt for each company is: (Round to three decimal places.) Debt Beta Company Name Delta Air Lines (DAL) Southwest Airlines (LUV) JetBlue Airways (JBLU) Continental Airlines (CAL) Market Capitalization ($ million) 4,951.1 4,904.5 1,223.2 1,106.2 Total Enterprise Value ($ million) 17,040.6 6,370.1 3,851.2 4,427.3 Equity Beta 1.906 0.957 1.854 1.971 Debt Ratings A/BBB B/CCC B b. Estimate the asset beta for each firm. The beta of the asset for each company is: (Round to three decimal places.) (Click on the following icon in order to copy its contents into a spreadsheet.) By rating Average beta Average Debt Betas by Rating and Maturity A and above BBB B B 15 Yr Average beta 0.01 0.06 0.07 0.14 Source: S. Schaefer and I. Strebulaev, "Risk in Capital Structure Arbitrage," Stanford GSB working paper, 2009 Print Print Done Data Table (Click on the following icon in order to copy its contents into a spreadsheet.) Company Name Delta Air Lines (DAL) Southwest Airlines (LUV) JetBlue Airways (JBLU) Continental Airlines (CAL) Market Capitalization ($ million) 4,951.1 4,904.5 1,223.2 1,106.2 Total Enterprise Value ($ million) 17,040.6 6,370.1 3,851.2. 4,427.3 Equity Beta 1.906 0.957 1.854 1.971 Debt Ratings BB A/BBB B/CCC b. Estimate the asset beta for each firm. The beta of the asset for each company is: (Round to three decimal places.) Asset Beta Company Name Delta Air Lines (DAL) Southwest Airlines (LUV) JetBlue Airways (JBLU) Continental Airlines (CAL) Market Capitalization ($ million) 4,951.1 4,904.5 1,223.2 1,106.2 Total Enterprise Value ($ million) 17,040.6 6,370.1 3,851.2 4,427.3 Equity Beta 1.906 0.957 1.854 1.971 Debt Beta 0.170 0.075 0.285 0.260 c. What is the average asset beta for the industry, based on these firms? The average asset beta for the industry is (Round to three decimal places.) Enter your answer in each of the answer boxes. Consider the following airline industry data from mid-2009: a. Use the estimates in table to estimate the debt beta for each firm (use an average if multiple ratings are listed). b. Estimate the asset beta for each firm. c. What is the average asset beta for the industry, based on these firms? a. Use the estimates in table to estimate the debt beta for each firm (use an average if multiple ratings are listed). The beta of the debt for each company is: (Round to three decimal places.) Debt Beta Company Name Delta Air Lines (DAL) Southwest Airlines (LUV) JetBlue Airways (JBLU) Continental Airlines (CAL) Market Capitalization ($ million) 4,951.1 4,904.5 1,223.2 1,106.2 Total Enterprise Value ($ million) 17,040.6 6,370.1 3,851.2 4,427.3 Equity Beta 1.906 0.957 1.854 1.971 Debt Ratings A/BBB B/CCC B b. Estimate the asset beta for each firm. The beta of the asset for each company is: (Round to three decimal places.) (Click on the following icon in order to copy its contents into a spreadsheet.) By rating Average beta Average Debt Betas by Rating and Maturity A and above BBB B B 15 Yr Average beta 0.01 0.06 0.07 0.14 Source: S. Schaefer and I. Strebulaev, "Risk in Capital Structure Arbitrage," Stanford GSB working paper, 2009 Print Print Done Data Table (Click on the following icon in order to copy its contents into a spreadsheet.) Company Name Delta Air Lines (DAL) Southwest Airlines (LUV) JetBlue Airways (JBLU) Continental Airlines (CAL) Market Capitalization ($ million) 4,951.1 4,904.5 1,223.2 1,106.2 Total Enterprise Value ($ million) 17,040.6 6,370.1 3,851.2. 4,427.3 Equity Beta 1.906 0.957 1.854 1.971 Debt Ratings BB A/BBB B/CCC b. Estimate the asset beta for each firm. The beta of the asset for each company is: (Round to three decimal places.) Asset Beta Company Name Delta Air Lines (DAL) Southwest Airlines (LUV) JetBlue Airways (JBLU) Continental Airlines (CAL) Market Capitalization ($ million) 4,951.1 4,904.5 1,223.2 1,106.2 Total Enterprise Value ($ million) 17,040.6 6,370.1 3,851.2 4,427.3 Equity Beta 1.906 0.957 1.854 1.971 Debt Beta 0.170 0.075 0.285 0.260 c. What is the average asset beta for the industry, based on these firms? The average asset beta for the industry is (Round to three decimal places.) Enter your answer in each of the answer boxes