Consider a firm that needs $10M for a risk-free project. It can borrow the whole amount ($10M) at 7%. The risk-free rate is 5%. The firm s cost of equity is 12% and its WACC is 10%. The tax rate is 0. What s the appropriate discount rate for the project "s" cash flows?

A.

7%

B.

5%

C.

12%

D.

insuffiecient information

E.

10%