Question
The Canadian Corp, wants to set up a new business line. According to the CFO, Emma Li, business is looking up. As a result, the
The Canadian Corp, wants to set up a new business line. According to the CFO, Emma Li, business is looking up. As a result, the project will provide a net cash inflow of $114,449 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 $1,839,918.
The company is somewhat unsure about the assumption of a 6 percent growth rate in its cash flows. At what constant growth rate would the company just break even (so that NPV of the project equals to zero) if it requires a 14 percent return on investment? Report your answer in decimal form, rounded to 4 decimal places.
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