Umsawli has a large burial ground and Romilla Enterprise is exploring the option to open a cemetery business with an initial investment of 5,000,000. The business is expected to provide a net cash inflow of R396,000 for the company during the first year, and the cash flows are projected to grow at a rate of 4% per year forever.

a. If Romilla requires a return of 12 % on such undertakings, should the cemetery business be started?

b. The company is somewhat unsure about the assumption of a growth rate of 4% in its cash flow. At what constant growth rate would the company break even if it still required a return of 11 % or 15% on investment