Louisiana Enterprises,an All-Equity Firm,is Considering a New Capital Investment

Louisiana Enterprises,an all-equity firm,is considering a new capital investment.Analysis has indicated that the proposed investment has a beta of 0.5 and will generate an expected return of 7 percent.The firm currently has a required return of 10.75 percent and a beta of 1.25.The investment,if undertaken,will double the firm's total assets.If r_RF = 7 percent and the market return is 10 percent,should the firm undertake the investment? (Choose the best answer. )

A) Yes;the expected return of the asset (7%) exceeds the required return (6.5%) .
B) Yes;the beta of the asset will reduce the risk of the firm.
C) No;the expected return of the asset (7%) is less than the required return (8.5%) .
D) No;the risk of the asset (beta) will increase the firm's beta.
E) No;the expected return of the asset is less than the firm's required return,which is 10.75%.