Question: Q8. (7 marks) Salt Spring Ltd. Is considering a project that will result in initial after-tax savings of $2.1 million at the end of the

Q8. (7 marks) Salt Spring Ltd. Is considering a project that

Q8. (7 marks) Salt Spring Ltd. Is considering a project that will result in initial after-tax savings of $2.1 million at the end of the first year, these savings will grow at a rate of 2% per year indefinitely. The firm has a debt/equity ratio of 0.80, a cost of equity of 11%, and an after-tax cost of debt of 4.6%. The cost-saving proposal is somewhat riskier than the usual project the firm undertakes so management uses the subjective approach of applying a +3% risk factor to the cost of capital for such risky projects. Under what circumstances should the company take on the project

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