Question: Marble Construction estimates that its WACC is 10% if equity comes from retained earnings. However, if the company issues new stock to raise new equity,

Marble Construction estimates that its WACC is 10% 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 10.8%. The company believes that it will exhaust its retained earnings at $2,500,000 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
A $ 640,000 14.5 %
B 1,040,000 13.2
C 1,050,000 11.1
D 1,180,000 10.4
E 480,000 10.6
F 640,000 10.2
G 750,000 11.5

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-acceptdon't accept
Project B -Select-acceptdon't accept
Project C -Select-acceptdon't accept
Project D -Select-acceptdon't accept
Project E -Select-acceptdon't accept
Project F -Select-acceptdon't accept
Project G -Select-acceptdon't accept

What is the firm's optimal capital budget? Round your answer to the nearest dollar.

$

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