This would be used as an appropriate discount factor to assess which of the following significantprojects?

FG has a weighted average cost of capital of 12% based on its existing:

• level of gearing of 30% (measured as debt/(debt + equity)); and

• business operations.

This would be used as an appropriate discount factor to assess which of the following significantprojects?
A . A project in an industry in which FG does not currently operate, funded wholly by equity.
B . A project to extend FG’s existing operations, funded wholly by debt.
C . A project in an industry in which FG does not currently operate, funded 30% with debt and 70% with equity.
D . A project to extend FG’s existing operations, funded 30% with debt and 70% with equity.

Answer: D