Hampton Manufacturing estimates that its WACC is 12.5%. The company is considering the following seven investment projects:

Project	Size	IRR
A	$750,000	14.0%
B	1,250,000	13.5
C	1,250,000	13.2
D	1,250,000	13.0
E	750,000	12.7
F	750,000	12.3
G	750,000	12.2

Assume that each of these projects is independent and that each is just as risky as the firm's existing assets. Which set of projects should be accepted?

Project A	-Select-AcceptDon't acceptItem 1
Project B	-Select-AcceptDon't acceptItem 2
Project C	-Select-AcceptDon't acceptItem 3
Project D	-Select-AcceptDon't acceptItem 4
Project E	-Select-AcceptDon't acceptItem 5
Project F	-Select-AcceptDon't acceptItem 6
Project G	-Select-AcceptDon't acceptItem 7

What is the firm's optimal capital budget? Write out your answer completely. For example, 13 million should be entered as 13,000,000. $

Now assume that Projects C and D are mutually exclusive. Project D has an NPV of $400,000, whereas Project C has an NPV of $350,000. Which set of projects should be accepted?

Project A	-Select-AcceptDon't acceptItem 9
Project B	-Select-AcceptDon't acceptItem 10
Project C	-Select-AcceptDon't acceptItem 11
Project D	-Select-AcceptDon't acceptItem 12
Project E	-Select-AcceptDon't acceptItem 13
Project F	-Select-AcceptDon't acceptItem 14
Project G	-Select-AcceptDon't acceptItem 15

What is the firm's optimal capital budget in this case? Write out your answer completely. For example, 13 million should be entered as 13,000,000. $

Ignore Part b and now assume that each of the projects is independent but that management decides to incorporate project risk differentials. Management judges Projects B, C, D, and E to have average risk, Project A to have high risk, and Projects F and G to have low risk. The company adds 2% to the WACC of those projects that are significantly more risky than average, and it subtracts 2% from the WACC of those projects that are substantially less risky than average. Which set of projects should be accepted?

Project A	-Select-AcceptDon't acceptItem 17
Project B	-Select-AcceptDon't acceptItem 18
Project C	-Select-AcceptDon't acceptItem 19
Project D	-Select-AcceptDon't acceptItem 20
Project E	-Select-AcceptDon't acceptItem 21
Project F	-Select-AcceptDon't acceptItem 22
Project G	-Select-AcceptDon't acceptItem 23

What is the firm's optimal capital budget in this case? Write out your answer completely. For example, 13 million should be entered as 13,000,000. $