(10 points) Consider the betas and debt-to-equity ratios for several stocks in the retail industry in the table below. Assume that the tax rate for all companies in the industry is 20%. Answer the following questions: a. Using the Hamada equation, calculate the average unlevered beta for the industry. b. If you were valuing a company with a D/E ratio of 1.6, what beta would you use in estimating the cost of equity? c. Looking qualitatively at the table, do you think your answer in Part B is reliable? What changes would you consider making at any step in your calculations? Beta D/E Macy's 0.73 1.98 Nordstrom 0.69 8.03 Kohl's 1.12 1:12 2.63 5.10 J.C. Penney 0.78 2.41 Gap