WACC and NPV [LO3, 5] Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $2.1 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 debt-equity ratio of .80, a cost of equity of 11 percent, and an aftertax cost of debt of 4.6 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 13 percent to the cost of capital 20. 937 for such risky projects. Under what circumstances should the company take on the project