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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,
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 earnings 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 A ...... Size ($650,000) ....... IRR% (14.0) Project B ...... size ($1,050,000) ..... IRR% (13.5) Project C ....... size ($1,000,000) ..... IRR% (11.2) Project D ....... size ($1,200,000) .... IRR% (11.0) Project E....... size ($500,000)..... IRR% (10.7) Project F ...... size ($650,000)..... IRR% (10.3) Project G ..... size ($700,000) ..... IRR% (10.2) What is the firm's optimal capital budget? Write out your answer completely. For example, 13 million should be entered as 13,000,000. $ _________
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