The Corporation plans to establish a new manufacturing facility by the end of 2021 with an initial investment of 40% of the revenue in 2021. The new plant is expected to generate a net cash flow equivalent to 25% of the revenue in 2021 during the first year, and this cash flow is anticipated to increase by 6% annually in perpetuity.

How would you work out question A and B

Revenue 2021 = 30,000,00

40% of Revenue 2021 = 12,000,000

Year 1 cash flow 25% of overall revenue = 7,500,000

a. If the company requires an 11% return on such undertakings, should the company invest in a new plant?

b. The company is somewhat unsure about the assumption of a growth rate of 6 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 11% on investment?