Dick Boe Enterprises, an All-Equity Firm, Has a Corporate Beta

Dick Boe Enterprises, an all-equity firm, has a corporate beta coefficient of 1.5.The financial manager is evaluating a project with an IRR of 21 percent, before any risk adjustment.The risk-free rate is 10 percent, and the required rate of return on the market is 16 percent.The project being evaluated is riskier than Boe's average project, in terms of both beta risk and total risk.Which of the following statements is correct?

A) The project should be accepted because its IRR (before risk adjustment) is greater than its required return.
B) The project should be rejected because its IRR (before risk adjustment) is less than its required return.
C) The accept/reject decision depends on the risk-adjustment policy of the firm.If the firm's policy were to reduce a riskier-than-average project's IRR by 1 percentage point, then the project should be accepted.
D) Riskier-than-average projects should have their IRRs increased to reflect their added riskiness.Clearly, this would make the project acceptable regardless of the amount of the adjustment.
E) Projects should be evaluated on the basis of their total risk alone.Thus, there is insufficient information in the problem to make an accept/reject decision.