Question: A large food processor and distributor is considering expansion into a chain of privately owned sports shoe outlets. The food company wishes to estimate the

A large food processor and distributor is considering expansion into a chain of privately owned sports shoe outlets. The food company wishes to estimate the risky discount rate for such investments so as to negotiate a fair price for the acquisition. Unfortunately, there are no stock exchange-listed sports shoe companies with a price history with which a "sports shoe outlet beta" can be estimated. However, executives are considering using the price history of another company to estimate the beta. Which of the following companies would be the most appropriate? Explain.

a. Another large food company.

b. A holding company for a football team.

c. A company that manufactures shoes.

d. A chain of swimwear and surfboard stores in California.

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