Final answer:
If a firm uses the same company cost of capital for evaluating all projects, they are likely to reject good low-risk projects only.
Step-by-step explanation:
If a firm uses the same company cost of capital for evaluating all projects, then situation C) The firm will reject good low-risk projects only is likely to occur.
When a firm uses the same cost of capital for evaluating all projects, it means that they are not taking into account the risks associated with each project. This can lead to the firm rejecting good low-risk projects because they may not meet the high cost of capital required by the firm. On the other hand, the firm may accept poor high-risk projects because they meet the cost of capital even though they may not be financially viable.
For example, let's say a firm has a cost of capital of 10%. They evaluate two projects - Project A with a low risk and expected return of 8%, and Project B with a high risk and expected return of 12%. If the firm uses the same cost of capital for both projects, they may reject Project A because it does not meet the 10% cost of capital, even though it has a lower risk and a positive return. At the same time, they may accept Project B because it meets the 10% cost of capital, even though it has a higher risk.