If equity investors require a 20% rate of return, what is the maximum acceptable amount of equity financing for a project with cash flows of $2 million a year in perpetuity before tax and interest? The project supports debt of $3 million with a 10% coupon, and the tax rate is 21%.

Multiple Choice

• $6.72 million

• $8.5 million

• $5.87 million

• $9.03 million