Safeco Company and Risco Inc are identical in size and capitalstructure. However

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?