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10-19 ADJUSTING COST OF CAPITAL FOR RISK Ziege Systems is considering the following inde- pendent projects for the coming year: Rate of Return 14.0% Project Required Investment $4 million B 5 million C 3 million D 2 million 11.5 9.5 Risk High High Low Average High Average Low 9.0 E 12.5 F 6 million 5 million 6 million 3 million 12.5 7.0 G H 11.5 Low Ziege's WACC is 10%, but it adjusts for risk by adding 2% to the WACC for high-risk proj ects and subtracting 2% for low-risk projects. a. Which projects should Ziege accept if it faces no capital constraints? b. If Ziege can only invest a total of $13 million, which projects should it accept, and what would be the dollar size of its capital budget? c. Suppose Ziege can raise additional funds beyond the $13 million, but each new increment (or partial increment) of $5 million of new capital will cause the WACC to increase by 1%. Assuming that Ziege uses the same method of risk adjustment, which projects should it now accept, and what would be the dollar size of its capital budget? This table oiva Faust Company's earnings per share for the last 10 years