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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?
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