Item$8$

Item $8$

A firm is considering an average$-$risk project with an IRR of $6\%.$ The firm$$s pre$-$tax cost of debt is $5\%,$ its cost of equity is $12\%,$ and its tax rate is $20\%.$ The firm$$s debt ratio $($D$/($D$+$E$)),$ in market values, is $0\mathrm{.}5.$ The firm should

Multiple Choice

accept the project only if it can be completely financed with equity.

accept the project only if it can be completely financed with debt.

accept the project regardless of the financing method.

reject the project regardless of the financing met