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You are analyzing Tiffany’s, an upscale retailer, and find that the regression estimate of the firm’s beta is 0.75; the standard error for the beta estimate is 0.50. You also note that the average unlevered beta of comparable specialty retailing firSSms is 1.15. a. If Tiffany’s has a debt/equity ratio of 20%, estimate the beta for the company based upon comparable firms. (The tax rate is 40%) b. Estimate a range for the beta from the regression. c. How would you reconcile the two estimates? Which one would you use in your analysis?

You are analyzing Tiffany’s, an upscale retailer, and find that the regression estimate of the firm’s beta is 0.75; the standard error for the beta estimate is 0.50. You also note that the average unlevered beta of comparable specialty retailing firSSms is 1.15.

a. If Tiffany’s has a debt/equity ratio of 20%, estimate the beta for the company based upon comparable firms. (The tax rate is 40%)

b. Estimate a range for the beta from the regression.

c. How would you reconcile the two estimates? Which one would you use in your analysis?

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