Martha S. Wine, president of "Santa Boarito Rural Pig Farms" (SB), located in the US, is facing a bit of a crisis.The company specializes in selling equipment to pig farmers in continental Europe and its major competitor has recently launched a major advertising campaign that has been cutting into sales.Martha has decided to get down and dirty and fight back.She is considering a new project that will revolutionize farming.SB has developed a machine that catches eggs laid by chickens and moves them along a conveyor belt to a feeding station where pigs can eat the eggs.SB wants to market the idea to farmers on the basis that they can sell their pigs as "Bacon and Eggs". Martha S. Wine hopes that the Bacon and Eggs project will provide SB with windfall profits.They have dubbed the three-year project "Schwein".You know the following:

A.The production for project Schwein is to take place at the firm's subsidiary in Schweinfurt, Bavaria, Germany.

B.Compared to the US, the pig farming industry in Germany is small and the only firms in the industry are all privately owned. As a result, you are unable to directly obtain an industry beta for the pig farming industry in Germany.

C.Because SB only recently went public (its IPO was roughly 6 months ago), there is insufficient return data for you to come up with a reasonable estimate of SB's equity beta.Instead, you can use information on the firm's competitors as a basis for your beta estimation (no additional risk adjustments are necessary). You observe that: