1-The stock of United Industries has a beta a 1.26 and an expected return of 12.0%. The risk-free rate of return is 3 percent. What is the expected return on the market?

2-Och, Inc., is considering a project that will result in initial aftertax cash savings of $1.72 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debt-equity ratio of .8, a cost of equity of 11.2 percent, and an aftertax cost of debt of 4.0 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 +2 percent to the cost of capital for such risky projects.

a. what is the company's WACC?

b. what is the project discount rate ?

c. what is the maxinun initial cost of company would be willing to pay the project? (Hint: the maximum initial cost should result in zero NPV)