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A firm is considering an average-risk project with an IRR of 9%. The firm's cost of debt ( K D ) is 5%, its cost
A firm is considering an average-risk project with an IRR of 9%. The firm's cost of debt (KD) is 5%, its cost of equity (KE) is 12%, and its tax rate (t) is 20%. The target debt ratio (D/(D+E)) for the project, in market values, is 0.5. The firm should
A. accept the project only if it can be completely finance with equity
B. accept the project only if it can be completely financed with debt
C. Reject the project onlyh if it can be completely financed with equity
D. reject the project regardless of the financing method
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