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Theoretical limits on time-of-arrival (equivalently, range) estimation are derived for multicarrier systems in the presence of interference. Specifically, closed-form expressions are obtained for Cramer-Rao bounds (CRBs) in various scenarios. In addition, based on CRB expressions, an optimal power allocation (or, spectrum shaping) strategy is proposed. This strategy considers the constraints not only from the sensed interference level but also from the regulatory emission mask. Numerical results are presented to illustrate the improvements achievable with the optimal power allocation scheme, and a maximum likelihood time-of-arrival estimation algorithm is studied to assess the effects of the proposed approach in practical estimators.