19.

Thurbinar has a stock price of

$19

per share, with

16

million shares outstanding. It also has

$107

million in outstanding debt, Thurbinar's equity beta is

1.00.

The risk-free rate is

3%,

and the market risk premium is

4%.

Assume Thurbinar's debt has a beta of zero. What is Thurbinar's unlevered cost of capital? Does your answer over or underestimate the true cost of capital?

Group of answer choices

5.96%; underestimate

9.60%; underestimate

5.96%; overestimate

8.60%; overestimate