12.) Firm X is a 100% equity financed conglomerate. It has two divisions with equal weights. Division 1 has a cost of equity of 20%. Division 2 has a cost of equity of 12%. The firm's CFO is now making investment decisions for the projects in these two divisions.

a. If the CFO uses firm-wide WACC to guide the investment decision, which division's project will be overinvested?

b. For the projects that will be invested mistakenly by the CFO, what is the range of the IRR of these projects? above 20% 12% to 16% below 12% 16% to 20%