Business, 09.03.2021 02:30 dheydar9556

Sommer, Inc., is considering a project that will result in initial after tax cash savings of $2.3mil at the end of the first year, and these savings will grow at a rate of 2% per year indefinitely. The firm has a target debt-equity ratio of 0.6, a cost of equity of 10%, and an after tax cost of debt of 4.6%. The cost-savings proposal is somewhat riskier than the usual project the firm undertakes; management uses a subjective approach and applies an adjustment factor of 3% to the cost of capital for such risky project. Under what circumstances should the company take on the project

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Sommer, Inc., is considering a project that will result in initial after tax cash savings of $2.3mil...

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