Question: Consider a project with free cash flows in one year of $90,000 in a weak economy or $117,000 in a strong economy, with each outcome

Consider a project with free cash flows in one year of $90,000 in a weak economy or $117,000 in a strong economy, with each outcome being equally likely. The initial investment required for the project is $80,000, and the project's cost of capital is 15%. The risk-free interest rate is 5%. Suppose that you borrow only $60,000 in financing the project. According to MM, the firm's equity cost of capital will be closest to:

		45%
		30%
		35%
		25%

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