A bio-technology company is looking to invest $25 billion in new technology that is expected to produce incremental cash flows of $7 billion, $12 billion, and $15 billion in each of the next three years, respectively. The CFO has asked that you and your team determine whether or not the company should invest in the new technology. In order to finance the project, the company will issue new bonds and new equity. Of the $25 billion in costs, $8 billion will be financed with a new debt issue. In fact, the company is anticipating issuing two different bonds - short-term bonds and long-term bonds. Thirty percent of the $8 billion in debt capital will be raised with the short-term bond issue while the other 70% will be raised with the long-term bond issue. Of the $25 billion in costs, $17 billion will be financed with new equity. Given this information, your objective is to calculate the weighted average cost of capital that then determine whether the future cash flows (in present value terms) are greater than the $25 billion investment. QUESTION: The bio-tech firm will also issue new equity. The standard for the company has been to use the CAPM to determine the cost of equity. Since you've taken Fin 3200, you know you need to find the beta, the risk-free rate, and the expected return on the market in order to calculate the expected return, which will proxy for the cost of equity. You have found that the yield on T-bills is 2.2%. You have also gathered historical data on market returns. You have found that over the last 10 years, the market has returned 14%, 19%, 8%, 4%, 28%, 17%, 15%, -3%, 26%, and 10%. You have also found that the returns for the bio-tech firm have a covariance with market returns of .016. Given this information, what is the firm's cost of equity according to the CAPM? O 18.4% O 16.1% O 21.8% O 15.2% 0 23.9% O 22.6% 14.8%