12.5

Marble Construction estimates that its WACC is 9% 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 9.6%. 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 $ 610,000 1,040,000 1,050,000 1,190,000 470,000 610,000 680,000 IRR 13.6% 13.8 10.0 9.3 9.4 8.9 10.2 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? Project A -Select- Project B -Select- Project C Project D -Select- -Select- -Select- Project E Project F -Select- Project G -Select- What is the firm's optimal capital budget? Round your answer to the nearest dollar