Marginal cost and marginal revenue, Finance Basics

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Use the concepts of marginal cost and marginal revenue to derive an optimal capital budget for Company X, which has identified 7 possible investment projects and determined its cost of capital as shown below.

Table A: Alternative Projects, Required Investments, and Expected Rate of Return

Project	Investment Required in Millions of Dollars	Expected Rate of Return on Investment
A	150	12%
B	300	15%
C	125	10%
D	75	16%
E	50	20%
F	500	14%
G	250	18%

Table B: Cost of Capital by Amount Raised

Block of Funds (in Millions)	Amount of Funds in Block	Cost of Capital for Block
First Block of Funds	$500	10%
Second Block of Funds	$400	11%
Third Block of Funds	$300	12%
Fourth Block of Funds	$200	13%
Fifth Block of Funds	$100	14%
Sixth Block of Funds	$100	15%

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