Carolina Insurance Company, an All-Equity Life Insurance Firm, Is Considering

Carolina Insurance Company, an all-equity life insurance firm, is considering the purchase of a fire insurance company.If the purchase is made, Carolina will be 50 percent larger than before.Currently, Carolina's share has a beta of 1.2 and the return required is 15.2 percent.The fire insurance company is expected to generate a return of 20 percent with a beta of 2.5.If the risk-free rate is 8 percent and the market risk premium is 6 percent, should Carolina make the investment?

A) No; the expected return is less than the required return.
B) No; the IRR is less than the appropriate required rate of return.
C) Yes; the IRR is greater than the appropriate required rate of return.
D) Yes; the expected return is greater than the required return.
E) Yes; the project's risk/return combination lies above the SML.