12. Which of the following is associated with the highest cost of capital to a firm?

Select one:

a. Internally generated funds (e.g. retained earnings)

b. Long-term bonds

c. Preference shares

d. Ordinary shares

e. Shares owned by Environmental, Social, and Governance funds

A firm is proposing to undertake a scale expansion. It would cost $40 million and produce an expected cash flow of $8 million a year in perpetuity before tax at 35 percent. The firm is financed 40 percent by debt. The expected return on the firm's equity is 20 percent, and the interest rate on its debt is 12 percent. What is the NPV of the project using the weighted average cost of capital?

Select one:

a. $21.48 million.

b. $12.91 million.

c. -$ 9.05 million.

d. -$ 5.61 million.

e. None of the above.