Result in initial aftertax cash savings

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In Excel, Och Inc is considering a project that will result in initial aftertax cash savings of $3.5 million at the end of the first year, and these savings will grow at a rate of 4% per year indefinitely. The firm has a target debt equity ratio of .55, a cost of equity of 13%, and an aftertax cost of debt of 5.5%. The cost saving proposal is somewhat riskier than the usual projects the firm undertakes; management uses the subjective approach and applies an adjustent factor of +2% to the cost of capital for such risky projects. Under what circumstances should Och take on the project.

Reference no: EM131446805

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Result in initial aftertax cash savings : In Excel, Och Inc is considering a project that will result in initial aftertax cash savings of $3.5 million at the end of the first year, and these savings will grow at a rate of 4% per year indefinitely. The firm has a target debt equity ratio of ...

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