Och, Inc., is considering a project that will result in initial aftertax cash savings of $1.83 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debtequity ratio of .8, a cost of equity of 12.3 percent, and an aftertax cost of debt of 5.1 percent. The cost-saving proposal is somewhat riskier than the usual projects the firm undertakes; management uses the subjective approach and applies an adjustment factor of +1 per cent to the cost of capital for such risky projects.

What is the maximum initial cost of company would be willing to pay for the project?