Information about Kroger Company and four industry competitors in 2020 is shown below (dollar values in millions).
a.	Estimate the industry asset beta, weighting each competitor by its proportion in the total market value of equity of all four competitors.					a.	The table below estimates the industry asset beta, with each competitor weighted by its proportion of total market value of equity.
b.	Relever the industry asset beta to reflect Krogers capital structure to estimate an industry-based equity beta for Kroger.
	Company	Equity beta	Interest-bearing debt	Market value equity			Company	Equity/firm value	Asset beta	% of Total market value	Weighted-asset beta
	Sprouts Farmers Market	0.30	$385	$3,270			Sprouts Farmers Market
	Supervalu Inc.	1.20	1,475	1,030			Supervalu Inc.
	Weis Markets	0.60	65	1,410			Weis Markets
	Whole Foods Markets	0.60	1,051	11,110			Whole Foods Markets
	Kroger Company	0.30	14,077	27,160					Industry asset beta
						b.	Industry risk (asset beta)
							Kroger equity/firm value
							Kroger's equity beta in the health and wellness food market

Information about Kroger Company and four industry competitors in 2020 is shown below (dollar values in millions). a. Estimate the industry asset beta, weighting each competitor by its proportion in the total market value of equity of all four competitors. b. o estimate Relever the industry asset beta to reflect Kroger's capital structure an industry-based equity beta for Kroger. Equity beta Interest- bearing debt Market value equity Company Sprouts Farmers Market 0.30 $385 $3,270 Supervalu Inc. 1.20 1,475 1.030 Weis Markets 0.60 1,410 65 1.051 0.60 11.110 Whole Foods Markets Kroger Company 0.30 14,077 27,160 Shareholders face two distinct risks: 1. The basic business risks inherent in the markets in which the firm competes. 2. The added financial risk created by the use of debt financing. Asset beta measures the business risk, while equity beta measures the combined effect of business and financial risks. Instructions Q1 Q2 + a. The table below estimates the industry asset beta, with each competitor weighted by its proportion of total market value of equity. Equity/firm Asset value beta Weighted- % of Total market value Company asset beta Sprouts Farmers Market Supervalu Inc. Weis Markets Whole Foods Markets b. Industry risk (asset beta) Kroger equity/firm value Kroger's equity beta in the health and wellness food market Industry asset beta BA== BE When debt = 0, E = V and BA = BE There is an implicit assumption here that debt features zero systematic risk, meaning that BD = 0. Information about Kroger Company and four industry competitors in 2020 is shown below (dollar values in millions). a. Estimate the industry asset beta, weighting each competitor by its proportion in the total market value of equity of all four competitors. b. o estimate Relever the industry asset beta to reflect Kroger's capital structure an industry-based equity beta for Kroger. Equity beta Interest- bearing debt Market value equity Company Sprouts Farmers Market 0.30 $385 $3,270 Supervalu Inc. 1.20 1,475 1.030 Weis Markets 0.60 1,410 65 1.051 0.60 11.110 Whole Foods Markets Kroger Company 0.30 14,077 27,160 Shareholders face two distinct risks: 1. The basic business risks inherent in the markets in which the firm competes. 2. The added financial risk created by the use of debt financing. Asset beta measures the business risk, while equity beta measures the combined effect of business and financial risks. Instructions Q1 Q2 + a. The table below estimates the industry asset beta, with each competitor weighted by its proportion of total market value of equity. Equity/firm Asset value beta Weighted- % of Total market value Company asset beta Sprouts Farmers Market Supervalu Inc. Weis Markets Whole Foods Markets b. Industry risk (asset beta) Kroger equity/firm value Kroger's equity beta in the health and wellness food market Industry asset beta BA== BE When debt = 0, E = V and BA = BE There is an implicit assumption here that debt features zero systematic risk, meaning that BD = 0