Gideon Brothers wants to set up a private cemetery business. According to the CFO, business is looking up. As a result, the cemetery will provide a net cash flow of $ 85,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 6 percent per year forever. The project requires an initial investment of $ 1,400,000.

i) Sally requires a 13 percent return on such undertakings, should the cemetery business be started? [3 marks]

ii) The company is somewhat unsure about the assumption of a 6 percent growth

rate in its cash flows. At what constant growth rate will the company just break

even if it still required a 13 percent return on in