Sinaloa Appliance, Inc., a private firm that manufactures home appliances, has hired you to estimate the company’s beta. You have obtained the following equity betas for publicly traded firms that also manufacture home appliances.
($ millions)
| Firm | Beta | Debt | Market Value of Equity |
| iRobot | 0.93 | $0 |
$3,190 |
| Middleby's | 1.88 | 759 |
7,490 |
| National Presto | 0.13 | 0 | 838 |
| Newell Brands | 1.08 | 11,938 | 26,670 |
| Whirlpool | 1.78 | 4,515 | 14,190 |
a. Estimate an asset beta for Sinaloa Appliance (Round intermediate calculations and final answer to 3 decimal places)
Asset beta:
Asset beta=Equity beta/(1+Debt/Equity)
Asset beta for Sinaloa=Average asset beta
=(0.93/(1+0/3190)+1.88/(1+759/7490)+0.13/(1+0/838)+1.08/(1+11938/26670)+1.78/(1+4515/14190))/5
=0.972683298
Sinaloa Appliance, Inc., a private firm that manufactures home appliances, has hired you to estimate the...