Problem 1. You are trying to estimate the beta of a private firm that manufactures home appliances. You have managed to obtain betas 3 for publicly traded firms that also manufacture home appliances (Table 1). The private firm has a debt-to-equity ratio of 25%. Taxes for all firms are 0 . a. Estimate the beta for the private firm. b. If you were told that the private firm has much higher operating leverage than the other firms, would you consider your estimate from part (a) to still be correct? If not, should it be higher or lower? Why? Table 1: Home appliance firms: balance sheets and betas Problem 1. You are trying to estimate the beta of a private firm that manufactures home appliances. You have managed to obtain betas 3 for publicly traded firms that also manufacture home appliances (Table 1). The private firm has a debt-to-equity ratio of 25%. Taxes for all firms are 0 . a. Estimate the beta for the private firm. b. If you were told that the private firm has much higher operating leverage than the other firms, would you consider your estimate from part (a) to still be correct? If not, should it be higher or lower? Why? Table 1: Home appliance firms: balance sheets and betas Problem 1. You are trying to estimate the beta of a private firm that manufactures home appliances. You have managed to obtain betas 3 for publicly traded firms that also manufacture home appliances (Table 1). The private firm has a debt-to-equity ratio of 25%. Taxes for all firms are 0 . a. Estimate the beta for the private firm. b. If you were told that the private firm has much higher operating leverage than the other firms, would you consider your estimate from part (a) to still be correct? If not, should it be higher or lower? Why? Table 1: Home appliance firms: balance sheets and betas Problem 1. You are trying to estimate the beta of a private firm that manufactures home appliances. You have managed to obtain betas 3 for publicly traded firms that also manufacture home appliances (Table 1). The private firm has a debt-to-equity ratio of 25%. Taxes for all firms are 0 . a. Estimate the beta for the private firm. b. If you were told that the private firm has much higher operating leverage than the other firms, would you consider your estimate from part (a) to still be correct? If not, should it be higher or lower? Why? Table 1: Home appliance firms: balance sheets and betas