Question: Taber Inc. is considering a project that will result in initial after-tax cash savings of $2.1 million at the end of the first year, and

Taber Inc. is considering a project that will result in initial after-tax cash savings of $2.1 million 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 debtequity ratio of .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; management uses the subjective approach and applies an adjustment factor of +3% 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?

Maximum cost $

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