Bolero Plc produces industrial equipment. The company's current financing mix is as follows:

Source of capital

Equity

Proportion

Loans

$71\%$

$29\%$

The cost of equity is estimated at $13\%,$ while the after$-$tax cost of borrowing is lower at $7\%.$

The cost of borrowing is lower than that of equity because:

A$.$ debt financing attracts tax benefits relative to equity financing

B$.$ shareholders are more risk$-$averse than banks

C$.$ it is simply a random event

D$.$ banks have worse information about the company than other parties

The company's Weighted Average Cost of Capital $($WACC$)$ is $11\mathrm{.}26\%($round to two decimal places$)$

What is the main assumption that accompanies the use of WA

x

You answered: $0\mathrm{.}17$

A$.$ WACC cannot be used in investment appraisal

$\text{'}$B$.$ new investments will have different WACC

C$.$ the funding mix will remain the same

D$.$ the cost of each source of finance does not change