Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $4.3 million at the end of the first year, and these savings will grow at a rate of 1.9 percent per year indefinitely. The firm has a target debt-equity ratio of .40, a cost of equity of 10.8 percent, and an aftertax cost of debt of 3.2 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 +2 percent to the cost of capital for such risky projects.

a.Calculate the discount rate for the project.(Do not round intermediate calculations and enter your answer as a percentrounded to 2 decimalplaces, e.g., 32.16.)

b.What is the maximum cost the company would be willing to pay for this project?(Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g., 1,234,567.89.)