Carolina Insurance Company,an All-Equity Life Insurance Firm,is Considering the Purchase

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 stock 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.