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OPTIMAL CAPITAL BUDGETHampton Manufacturing estimates that its WACC is 12.5%. Thecompany is considering the following seven investment projects:ProjectSizeIRRA$750,00014.0%B1,250,00013.5C1,250,00013.2D1,250,00013.0E750,00012.7F750,00012.3G750,00012.2Assume that each of these projects is independent and that eachis just as risky as the firm's existing assets. Which set ofprojects should be accepted?Project A-Select-AcceptDon't acceptItem 1Project B-Select-AcceptDon't acceptItem 2Project C-Select-AcceptDon't acceptItem 3Project D-Select-AcceptDon't acceptItem 4Project E-Select-AcceptDon't acceptItem 5Project F-Select-AcceptDon't acceptItem 6Project G-Select-AcceptDon't acceptItem 7What is the firm's optimal capital budget? Write out your answercompletely. For example, 13 million should be entered as13,000,000.$Now assume that Projects C and D are mutually exclusive. ProjectD has an NPV of $400,000, whereas Project C has an NPV of $350,000.Which set of projects should be accepted?Project A-Select-AcceptDon't acceptItem 9Project B-Select-AcceptDon't acceptItem 10Project C-Select-AcceptDon't acceptItem 11Project D-Select-AcceptDon't acceptItem 12Project E-Select-AcceptDon't acceptItem 13Project F-Select-AcceptDon't acceptItem 14Project G-Select-AcceptDon't acceptItem 15What is the firm's optimal capital budget in this case? Writeout your answer completely. For example, 13 million should beentered as 13,000,000.$Ignore Part b and now assume that each of the projects isindependent but that management decides to incorporate project riskdifferentials. Management judges Projects B, C, D, and E to haveaverage risk, Project A to have high risk, and Projects F and G tohave low risk. The company adds 2% to the WACC of those projectsthat are significantly more risky than average, and it subtracts 2%from the WACC of those projects that are substantially less riskythan average. Which set of projects should be accepted?Project A-Select-AcceptDon't acceptItem 17Project B-Select-AcceptDon't acceptItem 18Project C-Select-AcceptDon't acceptItem 19Project D-Select-AcceptDon't acceptItem 20Project E-Select-AcceptDon't acceptItem 21Project F-Select-AcceptDon't acceptItem 22Project G-Select-AcceptDon't acceptItem 23What is the firm's optimal capital budget in this case? Writeout your answer completely. For example, 13 million should beentered as 13,000,000.$
