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A company has a WACC1.5% for funding up to $4 million when retained earnings are used.

They also have a WACC2.7% for funding above $4 million when new equity is raised.

If they have the following independent investment opportunities, which projects should the company include in their budget? What is the company's optimal capital budget?

  • Project A:  Cost of $2 million; IRR 20%.
  • Project B:  Cost of $3 million; IRR 14%
  • Project C:  Cost of $4 million; IRR 13%

Reference no: EM131387935

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