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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

  1. 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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