We are interested in making a bid for Privately-Held Automotive Group (PAG). PAG is an up-and-coming automotive company offering a line of sedans, SUVs, and pick-up trucks. We have been asked to estimate PAG's levered beta to determine its fit into our company. Consider the following information from 2018 about comparable automotive firms:

Company Name	Total Debt Ratio	Levered Equity Beta	Marginal Tax Rate	Revenue ($Mill)
Priv-Held Auto	65.00%	?	40.00%
Ford Motor Co	85.98%	1.07	7.59%	157,978
Fiat Chrysler America	74.29%	2.18	11.95%	108,018
General Motors	81.18%	1.42	3.47%	144,010

a) Calculate the unlevered asset betas for each of the three comparable firms being sure to adjust appropriately for their respective marginal tax rates

b) Calculate the arithmetic industry average of the three asset betas

c) Calculate the weighted average asset beta using the revenues to determine the weights

d) Estimate a levered equity beta for the PAG division using the both the arithmetic and the weighted averages.

Answer rating: 100% (QA)

a Ford Motor Co Unlevered Asset Beta 107100759 0998 F... View the full answer