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Question
Texas Transport has five possible investment projects for the coming year. Each project is indivisible. They are:| Project | Investment (million) | IRR |
| A | $6 | 18% |
| B | $10 | 15% |
| C | $9 | 20% |
| D | $4 | 12% |
| E | $3 | 24% |
The firm's weighted marginal cost of capital schedule is 12 percent for up to $6 million of investment; 16 percent for between $6 million and $18 million of investment; and above $18 million the weighted cost of capital is 18 percent. The optimal capital budget is
A) $12 million.
B) $18 million.
C) $23 million.
D) $28 million.
Answer
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