In which of the following situations would it be appropriate to appraise this project using XY’s existing WACC of 10%?

XY has a weighted average cost of capital (WACC) of 10% based on its gearing level (measured as debt/debt+equity) of 40%. It is considering a signficant new project.

In which of the following situations would it be appropriate to appraise this project using XY’s existing WACC of 10%?
A . The project is in a different industry to XY’s current operations and funded entirely by equity.
B . The project is an extension of XY’s current operations and is funded 40% by debt and 60% by equity.
C . The project is an extension of XY’s current operations and is funded by equal amounts of debt and equity.
D . The project is in a different industry to XY’s current operations and is funded by equal amounts of debt and equity.

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Answer: B