Question: Och, Inc., is considering a project that will result in initial pretax cash savings of $2 million at the end of the first year, and

Och, Inc., is considering a project that will result in initial pretax cash savings of $2 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. The company has a target debtvalue ratio of 0.6, a cost of equity of 11 percent, and a pretax cost of debt of 5 percent. The tax rate is 30%. What is the NPV of this cost-saving project?

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