The Ajax Corporation has the following set of projects available to it:

Project

Investment Required

Expected Rate of Return

$($$ Million$)$

$(\%)$

A $50023\mathrm{.}0$

B $7518\mathrm{.}0$

C $5021\mathrm{.}0$

D $12516\mathrm{.}0$

E $30014\mathrm{.}0$

F $15013\mathrm{.}0$

G $25019\mathrm{.}0$

Note: All projects have equal risk.

Calculate the cumulative investment and complete Ajax's schedule of potential projects. $($Hint: Ajax prioritizes projects according to their expected rates of return.$)$

Project

Investment Required

Expected Rate of Return

Cumulative Investment

$($$ Million$)$

$(\%)$

$($$ Million$)$

A $50023\mathrm{.}0500$

C $5021\mathrm{.}0550$

D

B $7518\mathrm{.}0875$

E $30014\mathrm{.}01,300$

Ajax can raise funds with the following marginal costs. Calculate the cumulative funds raised to complete the following table.

Block of Funds

Cost of Capital

Cumulative Funds Raised

$($$ Million$)$

$(\%)$

$($$ Million$)$

First $25014\mathrm{.}0250$

Next $25015\mathrm{.}5500$

Next $10016\mathrm{.}0600$

Next $25016\mathrm{.}5$

Next $20018\mathrm{.}0$

Next $20021\mathrm{.}0$

What is the optimal capital budget $($in millions$)$ for Ajax?

$$1,300$

$$875$

$$1,000$

$$500$