If a Project Comes with Its Own Funding Offered at a Rate

Multiple Choice

If a project comes with its own funding offered at a rate lower than the cost of capital, the capital budgeting analysis should be conducted using:

A) the offered rate because it is appropriate to match sources and uses of funding whenever possible.
B) the cost of capital because to do otherwise would be unfair to departments whose projects don't happen to have separate funding.
C) the cost of capital because doing otherwise leads to irrational capital budgeting decisions.
D) an average of the offered rate and the cost of capital because that gives the best measure of the effect of the offer on the firm.