Part b) Glenn plc is considering a cost saving proposal that will cost 40 million but will result in substantial annual after-tax cash savings arising at the end of each year in perpetuity. Those savings are expected to grow at a rate of 5 per cent per year indefinitely. The firm has a target debt-to-equity ratio of 0.60, a cost of equity of 12 per cent, and an after- tax cost of debt of 5 per cent. The cost saving proposal is somewhat riskier than the usual projects the firm undertakes and therefore the cost of capital will need to be adjusted to reflect the additional risk. To do this management uses the subjective approach and applies an adjustment factor of +3 per cent to the cost of capital for projects with this level of risk. Required: i. Calculate the weighted average cost of capital (WACC) for Glenn plc. Explain your workings. Calculate the adjusted cost of capital for the project using the subjective approach. Explain your workings. ii. Page 8 of 16 Calculate the minimum annual savings that will make the project worthwhile. Explain your workings. Outline how the "pure play approach could be used to calculate an appropriate risk- adjusted cost of capital for this project. iv