Considering the water needs of the central region, it has been necessary to build a new national water conduction line that would cross a mountain range. The initial cost of the investment is $ 300 million and the consortium of associated companies has not fully decided on the financing arrangements for this joint project. Historically (previous projects) the Weighted Average Cost of Capital for similar projects has been an average of 12% per year. Income Tax of 29%

a) Two alternatives were identified to finance it, the first requires an investment of 70% of own funds at 14% per year, and a loan with an interest rate of 11% per year. The second alternative requires only 30% of equity and would be completed by means of a massive international loan that would carry an interest cost of 14.5% per year (which is partly due to the risk of the geographic location of the pipeline) . Evaluate each alternative using the weighted average cost of capital and indicate which financing plan would be the most convenient? b) If the consortium's financiers have decided that the Weighted Average Cost of Capital does not exceed 12% per year, which corresponds to the historical average of recent years, what is the maximum interest on a loan that is acceptable for each of the two financial alternatives raised in point a)?

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