A company is financed with equity only, and its cost of capital is $14\%$ and beta is $1\mathrm{.}2.$ The

company is considering two projects A and B$.$ Project A has a beta of $0\mathrm{.}93$ and an estimated

return of $12\%.$ Project B has a beta of $1\mathrm{.}57$ and an estimated return of $15\%.$ The market risk

premium is $7\mathrm{.}5\%$ and T$-$bills are yielding $5\%.$

a$.$ If you use the WACC as the hurdle rate, which project would you accept or reject?

b$.$ What project would you accept or reject based on the Security Market Line?

c$.$ Which project would be incorrectly accepted or rejected if we use the WACC as the

hurdle rate?