World Corporation is an all - equity financed company . It has traditionally employed a firm - wide discount rate for capital budgeting purposes. However, its two divisions, publishing and entertainment, have different degrees of risk given by P = 1.1, E = 1.8, while the beta for the overall firm is 1.3. The publishing division has proposed three projects with these internal rates of return (IRR) : P 1 = 13.2 percent; P 2 = 12.4 percent; and P 3 = 9.8 percent. The entertainment division has presented their three projects: E 1 = 16. 4 percent; E 2 = 17.8 percent; and E 3 = 14.7 percent. The risk - free rate is 4 percent, and