Estimate constant growth rate would the company just break

Assignment Help Financial Management

Reference no: EM132064871

The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up." As a result, the cemetery project will provide a net cash inflow of $127,000 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 $1,500,000.

a. If Yurdone requires a return of 12 percent on such undertakings, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $

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 12 percent on its investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Minimum growth rate %

Reference no: EM132064871

Questions Cloud

Would you be willing to purchase shares of common stock : Based upon this information, would you be willing to purchase shares of common stock in the firm? Why? Use the discounted dividend model

Calculate the aftertax cost of the companys debt : Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table.

Number of elements in the work breakdown structure : Should PERT network design be dependent on the number of elements in the work breakdown structure?

Module title-research skills for marketing : NTUC FairPrice Co-Operative is the largest Singapore based supermarket chain. The organisation is a co-operative of the National Trades Union Congress

Estimate constant growth rate would the company just break : At what constant growth rate would the company just break even if it still required a return of 12 percent on its investment?

Compute the hpy on your investment : The bond has 18 years to maturity. What rate of return do you expect to earn on your investment?

Does tiger brand pursue a cost leadership : Does Tiger Brand pursue a cost leadership, differentiation, or focus strategy? Evaluate its strategic approach in comparison to its competitors.

Redefining workplace learning for the 21st century : By Jenny Dearborn, Vice President, Chief Learning Officer, SuccessFactors - an SAP company

What is the annual savings contribution : A young couple is planning for the education of their two children. They plan to invest the same amount of money at the end of each of the next 16 years.

User Account

All Pages