You are analyzing Tiffanys, an upscale retailer, and find that the regression estimate of the firms beta
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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 firms is 1.15.
a. If Tiffany’s has a debt to equity ratio of 20%, estimate the beta for the company based on 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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a The levered beta using comparable firm data would be 115110402 1288 b Using the re...View the full answer
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