Ziege Systems is considering the following independent projects for the coming year. Project (A)-- Required Investment $4 million, Rate of Return 14.0%, Risk-HIGH Project (B)--Required Investment $5 million, Rate of Return--11.5%, Risk-HIGH Project (C)--Required Investment $3 million, Rate of Return--9.5%, Risk-LOW Project (D)--Required Investment--$2 million, Rate of Return--9.0%, Risk--AVERAGE Project (E)--Required Investment--$6 million, Rate of Return--12.5%, Risk-HIGH Project (F)--Required Investment--$5 million, Rate of Return--12.5%, Risk--AVERAGE Project (G)--Required Investment--$6 million, Rate of Return--7.0%, Risk--LOW Project (H)--Required Investment--$ 3 million, Rate of Return--11.5%, Risk-LOW

Ziege's WACC is 10% but it adjusts for risk by adding 2% to the WACC for high-risk projects 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 that 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?