Thunderhorse Oil. Thunderhorse Oil is a U$.$S$.$ oil company. Its current cost of debt is $6\mathrm{.}90\%,$ and the $10-$year U$.$S$.$ Treasury yield, the proxy for the risk$-$free rate of interest, is

$3\mathrm{.}60\%.$ The expected return on the market portfolio is $8\mathrm{.}60\%.$ The company's effective tax rate is $30\%.$ Its optimal capital structure is $55\%$ debt and $45\%$ equity.

a$.$ If Thunderhorse's beta is estimated at $1\mathrm{.}30,$ what is Thunderhorse's weighted average cost of capital?

b$.$ If Thunderhorse's beta is estimated at $1\mathrm{.}00,$ 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 $1\mathrm{.}30,$ what is Thunderhorse's weighted average cost of capital?