The CFO of ABC Inc. just negotiated a new line of credit for the firm from a bank at 5% interest. The CEO wants to build a new factory in his hometown and suggests that the CFO use the 5% interest rate to discount the cash flows. Does this make sense to you?

Group of answer choices

a. Yes. The CEO is the boss for a reason.

b. No. Since firms are not legally allowed to build projects in the CEOs hometown.

c. Yes. Because that is the cost of borrowing money to the firm.

d. No. The project must be evaluated based on its own risk not the overall cost to the firm of borrowing money.