7. Dan Franklin, president of Magnotech, Inc. and a director of Nysa, has called Knudsen's attention to the hurdle rate of 16 percent (Nysa's cost of capital currently used for all projects). Since the lRRs of all five projects exceed 16 percent, he asks why, especially in view of Nysa's ample cash flows and funds for investment, all of the projects should not be accepted? Knudsen, like Matlock, disagrees with this thinking, contending that none of the "foreign aid" projects gives Nysa an adequate return for the amount of risk the company would be taking. Knudsen plans to support his position by referring to Fig. 1, which shows that, while all four projects' returns lie above the line representing Nysa's weighted average cost of capital (ka), they are below the security market line (SML), which represents the minimum amount of return that a firm should require for a specified amount of risk. The oil project cannot he accepted unless one of the "foreign aid" projects is accepted in conjunction with it. Therefore, you should calculate for Knudsen the weighted average beta coefficients for Projects A through D, in conjunction with the oil drilling project and compute the internal rate of return for the combined projects of each of Projects A through D with the oil drilling project. Which project combination is the most advantageous? (Hint: plot these values, and those found in Question 5, on Figure 1 to illustrate better the relative positions of the investment proposals.)