Garcia Real Estate is involved in commercial real estate ventures throughout the United States. Some of these ventures are much riskier than other ventures because of market conditions in different regions of the country. If Garcia does not risk-adjust its discount rate for specific ventures properly, which of the following is likely to occur over time?
a. The firm will reject too many relatively safe projects.
b. The firm will make poor capital budgeting decisions that could jeopardize the long-run viability of the company.
c. The firm will become less risky.
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