Description 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 $105,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 5 percent per year forever. The project requires an initial investment of $1,580,000. a-1 What is the NPV for the project if Yurdone’s required return is 10 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)    NPV $    a-2 If Yurdone requires a return of 10 percent on such undertakings, should the firm accept or reject the project? Accept Reject   b. The company is somewhat unsure about the assumption of a growth rate of 5 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 10 percent on investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)    Constant growth rate  %  User generated content is uploaded by users for the purposes of learning and should be used following Studypool’s honor code & terms of service.

/in /by

Description

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 $105,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 5 percent per year forever. The project requires an initial investment of $1,580,000.

a-1

What is the NPV for the project if Yurdone’s required return is 10 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)

 

 NPV $ 

 

a-2

If Yurdone requires a return of 10 percent on such undertakings, should the firm accept or reject the project?

Accept
Reject

 

b.

The company is somewhat unsure about the assumption of a growth rate of 5 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 10 percent on investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

 

 Constant growth rate  % 

User generated content is uploaded by users for the purposes of learning and should be used following Studypool’s honor code & terms of service.