Assume that the firm has a WACC of 7%. The management has to decide on the new capital budget with the possibilities below:
Project 1 will cost $5,000 to implement and will produce a rate of return of 9% per year;
Project 2 will cost $400 and will produce a return of 5% per year;
Project 3 will cost $350 and will produce a return of 8% per year;
Project 4 will cost $700 and will produce a return of 3.5% per year.
Compute total capital budget for the company.