An all-equity firm with a beta of 1.21 is considering the following projects

1. =1.1, Expected Return = 13%
2. =1.2, Expected Return = 14%
3. =1.3, Expected Return = 15%

The risk-free rate is 5% and the expected return on the market is 12%. Which projects would be incorrectly accepted or incorrectly rejected if the firms overall cost of capital were used as a hurdle rate?

1. I
2. I&II
3. I,II&III
4. II, III
5. None of the above

With explanation please