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Thunderhorse Oil is a U.S. oil company. Its current cost of debt is 7.307.30​%, and the​...

Thunderhorse Oil is a U.S. oil company. Its current cost of debt is

7.307.30​%,

and the​ 10-year U.S. Treasury​ yield, the proxy for the​ risk-free rate of​ interest, is

3.103.10​%.

The expected return on the market portfolio is

8.708.70​%.

The​ company's effective tax rate is

3535​%.

Its optimal capital structure is

8080​%

debt and

2020​%

equity.a. If​ Thunderhorse's beta is estimated at

0.900.90​,

what is​ Thunderhorse's weighted average cost of​ capital?b. If​ Thunderhorse's beta is estimated at

0.600.60​,

significantly lower because of the continuing profit prospects in the global energy​ sector, what is​ Thunderhorse's weighted average cost of​ capital?

a. If​ Thunderhorse's beta is estimated at

0.900.90​,

what is​ Thunderhorse's weighted average cost of​ capital?

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Expert Solution

jeff jeffy answered 6 months ago
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