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.