Problem 1: DETERMINING THE CORRECT COST OF CAPITAL FOR AN INVESTMENT PROJECT Benchmark Inc. is an all-equity financed firm with a cost of capital of 8%. The firm has four investment projects available with returns depending on the state of the economy. Relevant information on each of the projects is summarized below State Probabilit 0.25 0.25 0.25 0.25 Project A 0.10 0.08 0.07 -0.03 0.40 Project B 0.12 0.10 0.09 0.07 0.60 Project C 0.13 0.11 0.06 0.04 0.80 Project D 0.24 0.17 0.07 0.05 1.50 4 Beta The risk free rate is 4% and the market risk premium is 6%. If the firm has sufficient capital to invest and the projects are not mutually exclusive, which of these projects should the firm undertake? And which projects would you pick based on the company cost of capital? Motivate vour answers and show vour calculations