Nelson Enterprises, an all-equity firm, has a beta of 2.0. Nelson's chief financial officer is evaluating a project with an expected return of 24%, before any risk adjustment. The risk-free rate is 7%, and the market risk premium is 6%. The project being evaluated is riskier than Nelson's average project, in terms of both its beta risk and its total risk. Which of the following statements is correct? a. The accept/reject decision depends on the firm's risk-adjustment policy. If Nelson's policy is to increase the required return on a riskier-than-average project to 3% over rS, then it should accept the project. b. The project should definitely be accepted because its expected return (before any risk adjustments) is greater than its required return. c. The project should definitely be rejected because its expected return (before risk adjustments) is less than its required return. d. Riskier-than-average projects should have their expected returns increased to reflect their higher risk. Clearly, this would make the project acceptable regardless of the amount of the adjustment. Clear my choice Malitz Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained the following information. - Malitz's noncallable bonds mature in 20 years, have an 8.50% annual coupon, a par value of $1,000, and a market price of $1,210.00. - The company's tax rate is 35%. - The risk-free rate is 2.00%, the market risk premium is 6.00%, and the stock's beta is 1.75 . - The target capital structure consists of 50% debt and the balance as common equity. Malitz uses the CAPM to estimate the cost of equity, and it does not expect to issue any new common stock. What is its WACC? a. 8.98% b. 8.39% c. 9.54% d. 7.89%