The management of Florida Phosphate Industries (FPI) is planning next years capital budget. The companys earnings and dividends are growing at a constant rate of 5%. The last dividend, D0, was $0.90; and the current equilibrium stock price is $7.73. FPI can raise new debt at a 14% before-tax cost. FPI is at its optimal capital structure, which is 40% debt and 60% equity, and the firms marginal tax rate is 40%. FPI has the following independent, indivisible, and equally risky investment opportunities:

Project, Cost, Rate of Return A $15,000 17% B 15,000 16 C 12,000 15 D 20,000 13

What is FPIs optimal capital budget?