Brandt Corporation has the following investment opportunities (IOs) for the coming year:

Project Initial Cost IRR

A 50,000,000 15.0%

B 40,000,000 12.0%

C 40,000,000 13.5%

D 35,000,000 14.0%

E 10,000,000 10.5%

They estimate the following WACCs (MCC) for various levels of capital needs:

Capital Needs WACC

$0 - $75,000,000 11.5%

$75,000,001 150,000,000 12.5%

$150,000,000 and over 13.5%

a. Graph the firms WACCs (MCC schedule). On this same graph, graph the firms investment opportunities (project IRRs). Fully label everything.

b. What is the WACC that should be used by the firm for its capital budgeting decisions? _____________

c. What is the firms optimal capital budget? __________________________________________________

PROBLEM GRAPH