Unsure about the assumptions of a growth rate

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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

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