Question

Hello, please advise, thanks

> Marble Construction estimates that its WACC is 11% if equity comes from retained earnings. However, if the company issues new stock to raise new equity, it estimates that its WACC will rise to 11.7%. The company believes that it will exhaust its retained earnings at $2,600,000 of capital due to the number of highly profitable projects available to the firm and its limited earnings. The company is considering the following seven investment projects: Project Size IRR $ 610,000 13.9% 1,050,000 13.3 990,000 11.3 1,190,000 11.2 470,000 11.4 610,000 12.6 660,000 12.4 Assume that each of these projects is independent and that each is just as risky as the firm's existing assets. Which set of projects should be accepted? mo Project A ✓ -Select- accept don't accept Project B -Select- Project C Project D -Select- Project E -Select- Project F -Select- Project G -Select- What is the firm's optimal capital budget? Round your answer to the nearest dollar.

Answer 1

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v ' 1* - 11:50 ENG 17-03-207015 EGI EH EI I EJ EK EL EM EN EO EP EL789 I 767 768 769 770 MARBLE SIZE PROJECT 72 773 774 (nuouwu 610000 ACCEPT 1050000 ACCEPT 610000 ACCEPT 660000 ACCEPT 1050000 REJECT 470000 REJECT 700000 REJECT WACC (11%) < IRR WACC (11%) < IRR WACC (11%) < IRR WACC(11.7%) < IRR WACC(11.7%) > IRR WACC(11.7%) > IRR WACC(11.7%) > IRR RETAINED EARNINGS = 2600000 EXHAUSTED SELECT PROJECTS 776 777 778 779 780 781 782 783 784 785 786 787 788 789 790 OPTIMAL BUDGET = 2930000 (610000 + 1050000 + 610000 + 660000] RATIO PI PBP ARR invest, EAA REPLACEMENTS IRRnpvbeta HPR GMAM EAC MACRS RELEVANT Mi-no-ir NPV BETA LEVERED REPLACEMENT BONC ... i