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Lebleu, Incorporated, is considering a project that will result in initial aftertax cash savings of $ 1 . 8 1 million at the end of
Lebleu, Incorporated, is considering a project that will result in initial aftertax cash savings of $ million at the end of the first year, and these savings will grow at a rate of percent per year indefinitely. The firm has a target debtequity ratio of a cost of equity of percent, and an aftertax cost of debt of percent. The costsaving proposal is somewhat riskier than the usual project the firm undertakes; management uses the subjective approach and applies an adjustment factor of percent to the cost of capital for such risky projects. What is the maximum initial cost the company would be willing to pay for the project?
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