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 10.9%. The company believes that it will exhaust its retained earnings at $2,400,000 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 $ 630,000 13.5 %
B 1,060,000 13.2
C 1,050,000 11.3
D 1,200,000 10.4
E 530,000 10.7
F 630,000 11.7
G 720,000 10.3

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 acceptItem 1
Project B -Select-acceptdon't acceptItem 2
Project C -Select-acceptdon't acceptItem 3
Project D -Select-acceptdon't acceptItem 4
Project E -Select-acceptdon't acceptItem 5
Project F -Select-acceptdon't acceptItem 6
Project G -Select-acceptdon't acceptItem 7

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

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