The Yurdone Corp. wants to set up a private cemetery business. According to the CFO, the business is “looking up.” As a result, the cemetery project will provide a net cash flow of $164,000 for the...

The Yurdone Corp. wants to set up a private cemetery business. According to the CFO, the

business is “looking up.” As a result, the cemetery project will provide a net cash flow of

$164,000 for the firm during the first year, and the cash flows are projected to grow at a rate of

4.7% forever. The project requires an initial investment of $1,825,000.

a. If the company requires a return of 12%, should the business be started?

b. The company is somewhat unsure about the assumption of a 4.7% growth rate in its

cash flows. At what constant growth rate wold the company just break even if it still

requires a return of 12%?

Jun 09, 2022

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