Safeco Company and Risco Inc are identical in size and capitalstructure. However the riskiness of their assets and cash flowsare somewhat different resulting in Safeco having a WACC of 10%and Risco a WACC of 12%. Safeco is considering Project X which hasan IRR of 10.5% and is of the same risk as a typical Safecoproject. Risco is considering Project Y which has an IRR of 11.5%and is of the same risk as a typical Risco project.Now assume that the two companies merge and form a new companySafeco/Risco Inc. Moreover the new companys market risk is anaverage of the pre-merger companies market risks and the mergerhas no impact on either the cash flows or the risks of Projects Xand Y. Which of the following statements is CORRECT?