8. The Tyler and Maria Corporation is evaluating a project to setup a plant to manufacture electronic gadgets to enhance automobile performance. According to the CFO, the business appears to be profitable with growth opportunities in the Northeastern corridor. The project will provide a net cash inflow of $250,000 for the firm during the first year. Cash flows are projected to grow at a rate of 2.8 percent per year forever. The project requires an initial investment of $3,700,000. A) If the company requires a return of 9 percent on such projects, should the business be started? B) Provide your analysis to justify your position.
8. The Tyler and Maria Corporation is evaluating a project to setup a plant to manufacture electronic gadgets to enhance automobile performance. According to the CFO, the business appears to be profitable with growth opportunities in the Northeastern corridor. The project will provide a net cash inflow of $250,000 for the firm during the first year. Cash flows are projected to grow at a rate of 2.8 percent per year forever. The project requires an initial investment of $3,700,000. A) If the company requires a return of 9 percent on such projects, should the business be started? B) Provide your analysis to justify your position.
Chapter11: Capital Budgeting And Risk
Section: Chapter Questions
Problem 9P
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