UNIBANCO estimated the weighted average cost of capital for Petrobrs to be 13.2% in Brazilian reais in

UNIBANCO estimated the weighted average cost of capital for Petrobrás to be 13.2% in Brazilian reais in August of 2004. Evaluate the methodology and assumptions used in the calculation.

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Risk-free rate Market premium Country risk premium Cost of equity ($) 4.5% 0.99 6.0% 5.5% 15.9% Cost of debt (after-tax) Tax rate Debt/total capital WACC (RS) 5.7% 34% 40% 13.2%