Risk in a revenue producing project can best be adjusted for by Ignoring it. Adjusting the discount rate upward for increasing risk. Adjusting the discount rate downward for increasing risk. Picking a risk factor equal to the average discount rate. Reducing the NPV by 10 percent for risky projects. Gulf Electric Company Gulf Electric Company (GEC) uses only debt and equity in its capital structure. It can borrow unlimited amounts at an interest rate of 10 percent so long as it finances at its target capital structure, which calls for 55 percent debt and 45 percent common equity. Its last dividend was $2.10; its expected constant growth rate is 6 percent, its stock sells on the NYSE at a price of $34; and new stock would net the company $28 per share after flotation costs. GEC's marginal tax rate is 39 percent, and it expects to have $100 million of retained eamings this year. GEC has two projects available: Project A has a cost of $200 million and a rate of return of 13 percent, while Project B has a cost of $125 million and a rate of return of 10 percent. All of the company's potential projects are equally risky. 16.23% 13.95% 15.03% 1563% 16.23%