1. Calculate the unlevered asset betas for each of the three comparable firms being sure to adjust appropriately for their respective marginal tax rates 2. Calculate the arithmetic industry average of the three asset betas 3. Calculate the weighted average asset beta using the revenues to determine the weights
|
Company Name |
Total Debt Ratio |
Levered Equity Beta |
Marginal Tax Rate |
Revenues ($ Mill) |
|
Priv-Held Automotive |
65.00% |
? |
40.00% |
|
|
Ford Motor Company |
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 |
1. Calculate the unlevered asset betas for each of the three comparable firms being sure to adjust appropriately for their respective marginal tax rates
2. Calculate the arithmetic industry average of the three asset betas
3. Calculate the weighted average asset beta using the revenues to determine the weights
4. Estimate a levered equity beta for the Privately-Held Automotive division for both the arithmetic and the weighted averages.
5. Write out the algebraic equation of the variance (s2) of a portfolio with three assets, A, B and C.
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