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Batesville Casket Company is evaluating the opening of a new casket and vault production operation. The project will provide a net cash inflow of $90,000

Batesville Casket Company is evaluating the opening of a new casket and vault production operation. The project will provide a net cash inflow of $90,000 next year. Demand is very steady, therefore cash flows are projected to grow at a rate of 4% each year forever. The project requires an initial cash outflow of $1,500,000. The firm has a required return of 11%.

  1. Should BBC begin construction of a new factory?
  2. The firm has experienced difficulty estimating the growth rate, therefore what is the break-even growth rate that would provide and NPV of 0?

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