Icicle Works plc is a frozen food company that intends to diversify into electronics. Theproject has a return of 12 per cent and Icicle Works is trying to decide whether it should be accepted. To help it decide it is going to use the CAPM to find a proxy beta for the project and has the following information on three electronics companies:

(a) Supertronic plc: This Company has an equity beta of 1.33 and is financed by 50 per cent debt and 50 per cent equity.

(b) Electroland plc: This Company has an equity beta of 1.30 and is financed by 40 per cent debt and 60 per cent equity. The company has just bought a non-electronics company with an asset beta of 1.4 that accounts for 20 per cent of its value.

(c) Transelectro plc: This Company has an equity beta of 1.05 and is financed by 35 per cent debt and 65 per cent equity.

Assume that all debt is risk-free and that corporation tax is 30 per cent. Icicle Works plc is financed by 30 per cent debt and 70 per cent equity. The risk-free rate of return is 5 per cent and the return on the market is 9 per cent. Should the company accept the project?