Having collected all of this information, you realize that there are two remaining questions to be answered before approaching your parents and asking them to lend you the money to start this new business venture:

1. At what price should high-quality pet rocks be sold at to ensure a minimum 10% return on invested capital?
2. Pet rocks are a fad that has come and gone in previous generations. So in making your assessment of this business opportunity should you assume a 3% terminal growth rate after year 5 or should you assume a declining 3% in demand for pet rocks after year 5?
   1. Your parents, having heard you talking about this business with your friends and siblings, have stated that any assessments must show the up-side of pet rock growth, and the down-side of pet rock growth, in year 5 and beyond.
3. Based on your analysis, would your parents invest in your new pet rock business?
   1. Justify your answer by discussing the potential returns on investment assuming growing demand and declining demand after year 5.
4. Which measure of return would you recommend be used to make the investment decision?
5. Your parents also wonder aloud what is this perpetuity thing that you keep referring to? Why is it important to your assessment of the pet rock business?

Pet rocks are back, they were all the rage in the late 1970 's, and they have suddenly made a big come back. You've just completed a couple of business management and accounting courses at Local University and you wonder aloud to friends, over a few pints of your favourite beverage, "is there an opportunity to cash in?" Later that night as you sit pondering your future, you start down the internet rabbit hole and determine that pet rocks are in very high demand in your local community. A few calculations later, you determine that the demand for pet rocks over at least the next five years will be as follows: You estimate that the direct costs for finding, cleaning and polishing high quality pet rocks would be around $5 per pet rock. In addition, direct labour costs would be $15 per pet rock. Starting a pet rock business would require $750,000 in capital expenditure, and a minimum net working capital of $100,000. Fixed costs for the business would be $500,000 in the first four years and $750,000 in year 5 . In your tax course at Local University, you learned that the average business pays an income tax rate of 20%, and that depreciation of capital costs related to similar businesses runs at around 25%. You have also learned that the average markup on full manufacturing cost of high quality pet rocks is 40%