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Estimate an asset beta for dome appliance

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This problem tests your understanding of the chapter appendix. Dome Appliance, Inc., a private firm that manufactures home appli- ances, has hired you to estimate the company's beta. You have ob- tained the following equity betas for publicly traded firms that also manufacture home appliances.

 

 

Firm

 

Beta

 

Debt

Market Valueof Equity

Black & Decker

1.19

$4,100

$6,300

Fedders Corp.

1.20

5

200

Helen of Troy Corp.

2.14

380

530

Salton, Inc.

3.25

375

115

Whirlpool

1.83

10,600

9,100

a. Estimate an asset beta for Dome Appliance.

b. What concerns, if any, would you have about using the betas of these firms to estimate Dome Appliance's asset beta?

Reference no: EM13891811

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