What at circumstances should adds take on the project

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Reference no: EM13953773

Adds. Inc., is considering a project that will result in initial after-tax cash savings o million at the end of the first year, and these savings will grow at a rate of 4% per year indefinitely. The find has a target debt-equity ratio of 0.7. a cost of equity of 14% and an after-tax cost of debt of 5.5%. 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 + 1% to the cost of capital of such risky projects. Under what at circumstances should Adds take on the project?

Reference no: EM13953773

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