IRR Mere to read the eBook: The Optimal Capital Budget OPTIMAL CAPITAL BUDGET Marble Construction estimates that its WACC is 10% If equity comes from retained earnings. However, if the company issues new stock to raise new equity, it estimates that its WACC will rise to 10.8%. The company believes that it will exhaust its retained earings at $2,500,000 of capital due to the number of highly profitable projects available to the firm and its limited earnings. The company is considering the following seven Investment projects: Project Size IRR D $650,000 14.0% 1,050,000 13.5 1,000,000 11.2 1,200,000 11.0 E 500,000 10.7 F 650,000 10.3 700,000 10.2 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 Project Select Project Project D Project E Select Project F Select Project G -Select What is the firm's optimal capital budget? Write out your answer completely. For example, 13 million should be entered as 13,000,000 $ Sales revenues Click here to read the eBook: Analysis of an Expansion Project PROJECT CASH FLOW Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: $25 million Operating costs (exduding depreciation) 17.5 million Depreciation 5 million Interest expense 5 million The company has a 40% tax rate, and its WACC is 13% Write out your answers completely. For example, 13 milion should be entered as 13,000,000 What is the project's cash flow for the first year (t = 1)? Round your answer to the nearest doller. b. If this project would cannibalize other projects by $2.5 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the The firm's project's cash flow would now be $ c. Ignore part b. If the tax rate dropped to 35%, how would that change your answer to part a? Round your answer to the nearest dollar. The firm's project's cash flow would -Select by $