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You are estimating the beta for a private firm that manufactures home appliances. You have betas of the firm that are publicly traded that also manufacture home appliances. Firm Beta Debt MV of Equity Fedders 1.20 5 200 Maytag 1.20 540 2,250 National 0.70 8 300 The private firm has a debt/equity ratio of 25% and a tax rate of 40%. The other firms also have a tax rate of 40%.

a. Estimate the beta for the private firm.

b. what are some of the concerns about using the betas of comparable firms.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92830911

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