PROBLEM 5 WACC and NPV Och, Inc., is considering a project that will result in initial aftertax cash savings of $2.9 million at the end of the first year, and these savings will grow at a rate of 4 percent per year indefinitely. The company has a target debt-equity ratio of .65, a cost of equity of 13 percent, and an aftertax cost of debt of 5.5 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+2 percent to the cost of capital for such risky projects. Under what circumstances should the company take on the project