# Optimal capital budget

SkyHigh Airlines has five possible investment projects for the coming year. Each project is indivisible. They are:

Project A: $5 million investment / IRR: 22%

Project B: $12 million investment / IRR: 16%

Project C: $6 million investment / IRR: 18%

Project D: $2 million investment / IRR: 14%

Project E: $3 million investment / IRR: 12%

SkyHigh's weighted marginal cost of capital schedule is 10 percent for up to $6 million of investment; 14 percent for between $6 million and $23 million of investment; and above $23 million the weighted cost of capital is 16 percent. The optimal capital budget is ________.

a) $12 million

b) $18 million

c) $23 million

d) $28 million

e) $10 million

https://brainmass.com/business/capital-budgeting/optimal-capital-budget-268774

#### Solution Preview

We start with the projects with the highest IRR and match with the cost of capital. The cost of capital is ...

#### Solution Summary

The solution explains how to determine the amount of optimal capital budget