When a project's discount rate is based on the firm's beta, why is it important that the project not alter the firm's risk profile? 9-4. Ifa firm takes actions that increase its operating leverage, we might expect to see an increase in its equity beta. Why? Explain when firms should discount projects using the cost of equity. When should they use the WACC instead? When should they use neither? When a project's discount rate is based on the firm's beta, why is it important that the project not alter the firm's risk profile? 9-4. Ifa firm takes actions that increase its operating leverage, we might expect to see an increase in its equity beta. Why? Explain when firms should discount projects using the cost of equity. When should they use the WACC instead? When should they use neither