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Business, 25.11.2019 22:31 vannitling12p4w44f

Hankins, inc., is considering a project that will result in initial aftertax cash savings of $5.2 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. the firm has a target debt–equity ratio of .51, a cost of equity of 13.1 percent, and an aftertax cost of debt of 6.5 percent. 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 percent to the cost of capital for such risky projects.

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Hankins, inc., is considering a project that will result in initial aftertax cash savings of $5.2 mi...
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