JPMorgan's Latin American Equity Research department produced the following WACC calculation for Petrobrs of Brazil versus Lukoil

JPMorgan's Latin American Equity Research department produced the following WACC calculation for Petrobrás of Brazil versus Lukoil of Russia in their June 18, 2004, report. Evaluate the methodology and assumptions used in the calculation. Assume a 28% tax rate for both companies.

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Petrobrás 4.8% 7.0% 4.5% 16.3% 0.87 8.4% 0.333 14.7% Lukoil 48% 3,0% Risk-free rate Sovereign risk Equity risk premium Market cost of equity Beta (relevered) Cost of debt Debt/capital ratio WACC 13.5% 1.04 6 .8% 0.475 12.3%