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Marble Construction estimates that its WACC is 12% 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 12.8%. The company believes that it will exhaust its retained earnings at $2,600,000 of capital due to the number of highly profitable projects available to the firm and its limited earnings. The company is considering the following seven investment projects:
ProjectSizeIRRA$ 600,00013.5%B1,090,00013.5C1,050,00012.4D1,210,00013.4E520,00013.1F600,00012.1G650,00011.9
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?
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