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Q7) The Aria Corporation wants to set up a business. According to the CFO, the business is looking up. As a result, the project will
Q7) The Aria Corporation wants to set up a business. According to the CFO, the business is "looking up." As a result, the project will provide a net cash inflow of $50,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 5% per year, forever. The project requires an initial investment of $650,000. The company is somewhat unsure about the assumption of a 5% growth rate in its cash flows. At what constant growth rate would the company just break even if it still required an 11% return on investment?
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