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%, esti- mate 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?