Unsure about the assumptions of a growth rate

Assignment Help Financial Management
Reference no: EM13881215

The Yurdone Corporation wants to set up a private cemetry business. According to the CFO, Barry M. Deep, business is "looking up". As a result, the cemetery project will provide net cash inflow of 124,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 5.7 percent per year forever. The project requires an initial investment of 1,470,000.

1. If Yurdone requires a return of 13 percent on such undertakings, what is the NPV?

 

2. The company is somewhat unsure about the assumptions of a growth rate of 5.7 percent its cash flows. At what constant growth rate would the company just break even if it still required a return of 13 percent on its investment?

Reference no: EM13881215

Questions Cloud

Prepare the journal entry for the issuance of the bonds : The bonds mature on December 31, 2032, and pay interest semiannually on June 30 and December 31. Brown Ferring's fiscal period is the calendar year.
What is the primary motivation for channel stuffing : Visit the financial education website created by Equade Internet Ltd. at www.investopedia.com. Note the definition for channel stuffing. According to this site, what is the primary motivation for channel stuffing?
What are unintended consequences of financial innovation : Relate your answers to the movie ‘Inside Job’. What are the unintended consequences of financial innovation? What are the unintended consequences of regulation? Explain how the financial crisis of 2008 occurred—who is to blame?
Included in current assets : Which of the following items is NOT included in current assets?
Unsure about the assumptions of a growth rate : The Yurdone Corporation wants to set up a private cemetry business. According to the CFO, Barry M. Deep, business is "looking up". The company is somewhat unsure about the assumptions of a growth rate of 5.7 percent its cash flows. At what constant g..
What is the geometric shape for o2 : What is the geometric shape for O2 and what how many bonds are in the structure
Transit was unable to pay the previous year''s interest : First City Bank Group agreed to settle Transit's debt in exchange for land having a fair value of $450,000.Transit purchased the land in 2009 for $325,000.
Calculated the four days supply of raw materials : Using the data from the Dell Computer annual report determine  how  Dell  calculated  the  four  days'  supply  of  raw  materials.  Do   you think four days'supply is a valid representation of the amountofrawmaterialDell? has on hand at the end of t..
How many grams of water will be produced : How many grams of water will be produced from the combustion of 28.06g of C2H4 in the presence of 32.00g of O2 if the reaction is 98.0%?C2H4 + 3 O2  yields  2CO2 + 2H2O

Reviews

Write a Review

Financial Management Questions & Answers

  Covered interest arbitrage

Covered Interest Arbitrage. Assume the following information: Quoted Price Spot rate of Canadian dollar $.80 90-day forward rate of Canadian dollar $.79 90-day Canadian interest rate 4% 90-day U.S. interest rate 2.5% 1- Given this information, what w..

  Study of investment analysis and portfolio management

Study of Investment Analysis and Portfolio Management is a specialised area of study that is aimed at maximising return given a level of risk. The principles of Investment Analysis and Portfolio Management have broadly been applied by large corporate..

  The principal-agent problem arises because

The principal-agent problem arises because _____ Buying bonds in a firm that has a high net worth is beneficial to the investor because _____.  Governments regulate financial systems because _____

  What is the value of the firms preferred stock

Can you explain the Zero Growth Model and solve this problem? A firm has to pay a dividend of $1.20 per share till perpetuity, a zero growth rate of dividends, and a required return of 10 percent. What is the value of the firm's preferred stock?

  Capital balance after closing income summary to capital

Deng and Dang are partners who share income in the ratio of 3:2. Their capital balances are $48,122 and $62,776 respectively. Income Summary has a credit balance of $44,798. What is Deng's capital balance after closing Income Summary to Capital?

  The operating cash flows of a project

The operating cash flows of a project:

  What is bonds price and annual yeld to maturity

fixed coupon bond , 20 years left until maturity , coupon rate 6% , yield of bond 6.2% , paid semi annual. What is bond's price? fixed coupon bond, 12 years left until maturity , coupon rate 7% , price of bond is $1060.00 , paid semi annually. What i..

  What will be the price of the bond

XYZ has a $1,000 Face Value 5% Coupon Bond (paid semi-annually). The bond is selling for $949 today and matures in 8 years. (The YTM today is 5.8%) A) What will be the price of the bond in 1 year if the YTM investors demand is still 5.8%? $_________?..

  What is the required return

Rabie, Inc., has an issue of preferred stock outstanding that pays a $3.80 dividend every year, in perpetuity. If this issue currently sells for $78.45 per share, what is the required return?

  Cost of capital rising faster than its return on assets

In the 2010 10-K Frontier’s management wrote, If the interest we pay on deposits and other borrowings increases at a faster rate than the interest we receive on loans and other investments, our net interest income, and therefore earnings, could be ad..

  European-style floating lookback call option on stock index

A new European-style floating lookback call option on a stock index has a maturity of 9 months. The current level of the index is 400, the risk-free rate is 6% per annum, the dividend yield on the index is 4% per annum, and the volatility of the inde..

  One of the most common business tools throughout

swot analysis and strategic scorecardone of the most common business tools during organizational assessment is the

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd