Consider a large Oil Company. It has three divisions: retail, refinery, and oil exploration/extraction These divisions have different risks. Currently the company has all its operations located in Texas only. The firm is financed with 20% debt and 80% equity. The WACC of the overall company is 25% What is true? I. Suppose the company is considering a new exploration/extraction project in Texas, and it will finance the project with 20% debt and 80% equity. Then, for such project, the discount rate has to be exactly 25%. II. Suppose the company is considering its first exploration/extraction project in Siberia, Russia, and it will finance the project with 20% debt and 80% equity. Then, for such project, the discount rate is likely to be lower than the discount rate for the exploration/extraction project in Texas.

		I and II
		II only
		I only
		None of the above.