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Thurbinar has a stock price of $16 per share, with 16 million shares outstanding. It also has $101 million in outstanding debt. Thurbinar's equity beta

Thurbinar has a stock price of

$16

per share, with

million shares outstanding. It also has

$101

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?

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