Texaco discovers new oil field in Texas and needs to build an oil pipeline connecting the oilfield and its Galvaston refinery. Texaco has two options to finance the project

100% by company bond. The interest rate is estimated to be 12%

50% by company bond and 50% by common stock.

Assume Texaco is in 45% income tax bracket. Risk-free rate is 5%, Market rate of return is 12%, common stock of the Texaco has a beta value 1.20. Determine the MARR under each option