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16. WACC and NPV Och, Inc., is considering a project that will result in initial aftertax the end of the first year, and these savings
16. WACC and NPV Och, Inc., is considering a project that will result in initial aftertax the end of the first year, and these savings will grow a rate of savings 3 percent per year indefinitely. The company has a target debt-equity ratio at of cash of $1.85 million at debt of 4.3. percent. The cost- .65, cost of equity of 11 percent, and an aftertax cost projects of the firm undertakes; manage- proposal is somewhat riskier than the usual saving uses and applies an adjustment factor of +2 percent cost ment of capital the for subjective such risky approach projects. Under what circumstances should the to company the take the project?
16. WACC and NPV Och, Inc., is considering a project that will result in initial aftertax. cash savings of $1.85 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The company has a target debt-equity ratio of .65, a cost of equity of 11 percent, and an aftertax cost of debt of 4.3. percent. The cost saving proposal is somewhat riskier than the usual projects the firm undertakes, manage- cost of capital for such risky projects. Under what circumstances should the company should use when evaluating its take on the project? Don has the following for Step by Step Solution
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