that Alpine's CFO restricted total investment for the year to $18 million. Hence, you have to determine in which of the three projects in the following table Alpine should invest. Project A $B C Investment required $ 14 million 7 million 8 million IRR 10.00% 7.60% 7.00% Alpine's former budget director had used an arbitrary fixed discount (or required) rate to evaluate the firm's capital budgeting projects. Unfortunately, this led to some "bad calls" and, eventually, the replacement of the former budget director. On the other hand, Ron believes that the Weighted Average Cost of Capital (WACC) should be used to evaluate capital budgeting projects. As a result, he asked you to use flotation costs and market value weights of debt and equity to estimate the Marginal Cost of Capital (MCC) and use it to decide in which of the three projects Alpine should invest. In the meeting you asked Ron how Alpine will raise the money needed for its capital budget. Ron indicated that the money will be raised from Alpine's 2018 retained earnings and from the sale of new bonds and stocks. With respect to earnings retention, in 2018 Alpine's net income was $10 million and its retained earnings $4 million. In addition, Alpine expects its annual dividends per share of common stock to grow at nine percent for ever. Regarding the sale of new securities, Ron recommended that new securities be sold in a way that does not change the current market value weights of debt and equity in Alpine's capital structure. Presently, Alpine has (i) 28 million shares of common stock outstanding with a $14 market price each and (ii) 200,000 bonds outstanding each having a $921 market price, five years to maturity, $1,000 par value, and three percent annual coupon rate (interest is paid semi-annually). Alpine's investment banker has informed Ron that there will be no flotation costs for any amount of new bonds the firm decides to sell. However, if the firm decides to sell new stocks the investment banker will charge flotation costs equal to 10% of the stock's selling price for an amount of new equity up to $9 million and 25% of the stock's selling price for any new equity amount in excess of $9 million. The investment banker assured Ron that new bonds and stocks will have the same characteristics and sell at the same prices as Alpine's currently outstanding bonds and stocks. Alpine's tax rate is 35%.