The management of DuPont is planning next year's capital budget. The company's earnings and dividends are growing at a constant rate of 5 percent. The last dividend, Do, was $0.90; and the current equilibrium stock price is $7.73. DuPont can raise new debt at a 14 percent before-tax cost. DuPont is at its optimal capital structure, which is 40 percent debt and 60 percent equity, and the firm's marginal tax rate is 40 percent. DuPont has the following independent, indivisible and equally risky investment opportunities:
Project Cost Rate of Return
A $15,000 17%
B $15,000 16%
C $12,000 15%
D $20,000 13%
What is DuPont's optimal capital budget?