ou are trying to estimate the beta of a private firm. You have managed to obtain betas for two

comparable publicly traded firms in the same industry. The private firm has a debt equity ratio of

35% and faces a tax rate of 40%. The publicly traded firms both have marginal tax rates of 40%

as well. Estimate the beta (levered) for the private firm using the information provided and bottom-

up approach:

Comparable firms:

Firm 1 has a beta of 1.2 with a D/E ratio of 15%

Firm 2 has a beta of 1.7 with a D/E ratio of 60%

1.20

1.27

1.35

1.42