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You are trying to estimate the beta of a private firm that manufactures home appliances. You have managed to obtain betas for publicly traded firms
- You are trying to estimate the beta of a private firm that manufactures home appliances. You have managed to obtain betas for publicly traded firms that also manufacture home appliances.
Firm | Beta | Debt(in millions) | MV of Equity(in millions) |
Black & Decker | 1.5 | $2,000 | $3,000 |
Fedders Corp. | 1.3 | $5 | $200 |
Maytag Corp. | 1.2 | $650 | $2,250 |
National Presto | 0.9 | $10 | $300 |
Whirlpool | 1.7 | $3,100 | $4,000 |
The private firm has a debt equity ratio of 35% and faces a tax rate of 36 %. The publicly traded firms all have marginal tax rates of 27%, as well.
Estimate the beta for the private firm.
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