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Your firm is considering taking on a project that will result in aftertax cash savings of $ 1 5 0 , 0 0 0 per
Your firm is considering taking on a project that will result in aftertax cash savings of $ per year for the next years. Your firm has a debttoequity ratio. The yield to maturity on bonds is Corporate tax rate is The current stock price is $ The firm has paid dividends of $$ and $ over the last years and the most recent dividend payment is $ Use the arithmetic average growth rate to estimate the cost of equity. Since this project is riskier than usual, management will apply an adjustment factor of to the cost of capital for this project. What is the maximum cost of the project for us to accept?
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