Citigroup Smith Barney (Reais). Petrobrs Petrleo Brasileiro S.A. or Petrobras is the national oil company of Brazil. It is publicly traded, but the government of Brazil holds the controlling share. It is the largest company in the Southern Hemisphere by market capitalization and the largest in all of Latin America. As an oil company, the primary product of its production has a price set on global marketsthe price of oiland much of its business is conducted in the global currency of oil, the U.S. dollar. In their report, Citigroup SmithBarney calculated a WACC for Petrobrs denominated in Brazilian reais (R$). Evaluate the methodology and assumptions used in this cost of capital calculation as shown in the table. Which of the following statements is correct? (Select the best choice below.) O A. The calculation uses a high risk-free rate, a high value of beta, and a high cost of debt, resulting in a high estimate of final WACC, which is similar in value to other estimates. OB. The calculation uses a low risk-free rate and a low value of beta, resulting in a low estimate of the cost of capital. Since the assumed value of the cost of debt is high, the final WACC estimate tends to be reasonable. OC. The calculation uses a high risk-free rate and a high value of beta, resulting in a high estimate of the cost of capital. Since the assumed value of the cost of debt is low, the final WACC estimate tends to be reasonable. OD. The calculation uses a low risk-free rate, a low value of beta, and a low cost of debt, resulting in a low estimate of final WACC, which is similar in value to other estimates. X Data table Risk-free rate (Brazilian C-Bond) 9.90% Petrobrs levered beta 1.40 Market risk premium 5.50% Cost of equity 17.60% Cost of debt 10.00% Brazilian corporate tax rate 34.00% Long-term debt ratio (% of capital) 50.60% WACC (R$) Click on the icon located on the top-right corner of the data table in order to copy its contents into a spreadsheet 12.00% Print Done