OPTIMAL CAPITAL BUDGET Hampton Manufacturing estimates that its WACC is 12,5%. The company is considering the following seven investment projects; Size IRR A $750,000 14.0% 8 1,250,00 13.5 ? 1,250,000 13.2 D 1,250,000 13.0 750,000 12.7 750,0 12.3 G 750,000 12.2 a. Assume that each of these projects is independent and that each is just as risky as the firm's existing assets. Which set ef projects should be accepted? Projcct A -Select- Project B Select- Project C (-Select- Project D |-Select- Project ESelect- Project F Select- Project G ??Select- What is the firm's optimal capital budget? Write aut yaur answer campletely. For example, 13 million should be entered as 13,000,000. b. Now assume that Projects C and D?re mutually exclusive. Project D has an NPV of $400,000, whereas Project C hasan NPV af S3S0 000 Project A Select Project B Select- Project C Select- Project D Select- Project E Select- Project F Select- Project G -Select- 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 which set af projects should be accepted? c. 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 to have low risk. The company adds 2% to the wACC cf those projects that are significantly more risky than average, and it subtracts 2% from the WACC of thoGB projects that are substantially less sky than average which set of projects should be accepted