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Finding NPV and constant growth rate The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business
Finding NPV and constant growth rate
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $100,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 4 percent per year forever. The project requires an initial investment of $1, 530,000. What is the NPV for the project if Yurdone's required return is 11 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) If Yurdone requires a return of 11 percent on such undertakings, should the firm accept or reject the project? Reject Accept The company is somewhat unsure about the assumption of a 4 percent growth rate in its cash flows. At what constant growth rate would the company just break even if it still required a return of 11 percent on investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Step by Step Solution
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