Raymond Manufacturing is considering the following capital projects. The internal rate of return (IRR) has been calculated for each project. Cost Project (Millions of dollars) IRR $40 $40 $80 11.6% 11.2% 10.8% The optimal capital budget (OCB) is the budget size that maximizes the firm's wealth given the opportunities for investment and the cost of capital Raymond's managers have plotted the marginal cost of capital (MCC) schedule to reflect how the cost of capital increases as new capital is raised Assume that the proposed projects are independent and equally risky and that their risks are equal to Raymond's average existing assets Tool tip: Mouse over the points on the graph to see their coordinates PERCENT OCB IRR = 1 1.6% IRR= 11.2% wACq: 11.0% WACC= 10.8% IRR 10.8% 10 0 20 40 60 80 100 120 140 160 NEW CAPITAL (Millions of dollars) Refer to the preceding graph, and place the black point (X symbol) at the point that represents the OCB to find the answer What is Raymond Manufacturing's optimal capital budget? $80.0 million $90.0 million O $120.0 million $100.0 million What is the company's weighted average cost of capital (WACC) at the optimal capital budget? 11.0% 11.6% 12.0% 10.8%