Problem $13-16$ WACC and NPV

Lebleu, Incorporated, is considering a project that will result in initial aftertax cash

savings of $$1\mathrm{.}84$ million at the end of the first year, and these savings will grow at a rate

of $1$ percent per year indefinitely. The company has a target debt$-$equity ratio of $75,$ a

cost of equity of $12\mathrm{.}4$ percent, and an aftertax cost of debt of $5\mathrm{.}2$ percent. The cost$-$

saving proposal is somewhat riskier than the usual projects the firm undertakes;

management uses the subjective approach and applies an adjustment factor of $+3$

percent to the cost of capital for such risky projects. What is the maximum initial cost the

company would be willing to pay for the project? $($Do not round intermediate

calculations and enter your answer in dollars, not millions of dollars, rounded to $2$

decimal places, e$.$g$.,1,234,567\mathrm{.}89)$

Maximum cost