The management of California Fluoride Industries (CFI) is planning next year’s capital budget. The company’s earnings and dividends are growing at a constant rate of 4 percent. The last dividend, D0, was $0.80; and the current equilibrium stock price is $8.73. CFI can raise new debt at a 12 percent before tax cost. CFI is at its optimal capital structure, which is 35 percent debt and 65 percent equity, and the firm’s marginal tax rate is 40 percent. CFI has the following independent, indivisible, and equally risky investment opportunities: Project Cost Rate of Return, A $ 18,000 9%, B 16,000 11%, C 13,000 15%, D 23,000 13% What is CFI’s optimal capital budget? a. $70,000 b. $36,000 c. $34,000 d. $47,000 e. $0