Business, 04.08.2020 17:01 live4dramaoy0yf9

Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $5.3 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The firm has a target debt-equity ratio of .52, a cost of equity of 13.2 percent, and an aftertax cost of debt of 6.6 percent. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of 1 percent to the cost of capital for such risky projects. Required:a. Calculate the WACC. b. What is the maximum cost the company would be willing to pay for this project?

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Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $5.3 mi...