Evaluate each of the following statements (True or False).

a) Underestimation of the market risk premium results in the underestimation of the cost of capital for a project and in turn increases the likelihood that a negative NPV project is falsely accepted.

b) In general, the estimates of equity beta vary widely across firms even in the same industry, whereas the estimates of unlevered asset beta are fairly similar in the same industry.

c) If debt tax deductibility is the only imperfection in the capital market, the value of levered firm is equal to the sum of the value of unlevered assets and the value of debt tax shields.