In evaluating a new investment project, a firm needs to decide on the appropriate discount rate to use for discounting future cash flows. The firm can either use explicit capital costs, such as the cost of borrowing, or implicit opportunity costs, such as the return on an alternative investment. Assume the following: The cost of borrowing for the firm is 6%. The firm has an alternative investment opportunity that could yield an expected return of 8%. Based on this information:

1. Discuss which discount rate (6% or 8%) the firm should use for evaluating the new investment project. Explain your reasoning, considering both the cost of borrowing and the opportunity cost.