Question: (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

(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.

($ millions) Market Value of Equity Firm Beta Debt 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?AppendixLO1

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