Question: 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,
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 9.8%. The company believes that it will exhaust its retained eamings at $2,300,000 of capital due to the number of highly profitable projects available to the firm and its limited carnings. The company is considering the following seven investment projects: Assume that each of these projects is independent and that each is fust as risky as the firm's existing assets. Which set of projects should be accepted? Project A Project B Project C Project D Project E Project F Project G What is the firm's optimal capital budget? Round your answer to the nearest dollar
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
