A company has a WACC1.5% for funding up to $4 million when retained earnings are used
January 10th, 2018
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%