The Yurdone Corporation wants to set up a private cemetery business. Accordi CFO, Barry M. Deep, business is "looking up." As a result, the cemetery pr provide a net cash inflow of $128,000 for the firm during the first year, and the c are projected to grow at a rate of 6.1 percent per year forever. The project re initial investment of $1,510,000. a. If the company requires a return of 13 percent on such undertakings, what is t of the project? (Do not round intermediate calculations and round your ans decimal places, e.g., 32.16.) b. The company is somewhat unsure about the assumption of a growth rate of 6 percent in its cash flows. At what constant growth rate would the company jus even if it still required a return of 13 percent on its investment? Solve for g, that makes the PV of the projected cash flows equal to the initi investment. In other words, the NPV will be $0.00 (Do not round intermediate calculations and enter your answer as a percen
The Yurdone Corporation wants to set up a private cemetery business. Accordi CFO, Barry M. Deep, business is "looking up." As a result, the cemetery pr provide a net cash inflow of $128,000 for the firm during the first year, and the c are projected to grow at a rate of 6.1 percent per year forever. The project re initial investment of $1,510,000. a. If the company requires a return of 13 percent on such undertakings, what is t of the project? (Do not round intermediate calculations and round your ans decimal places, e.g., 32.16.) b. The company is somewhat unsure about the assumption of a growth rate of 6 percent in its cash flows. At what constant growth rate would the company jus even if it still required a return of 13 percent on its investment? Solve for g, that makes the PV of the projected cash flows equal to the initi investment. In other words, the NPV will be $0.00 (Do not round intermediate calculations and enter your answer as a percen
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:**The Yurdone Corporation Project Analysis**
The Yurdone Corporation is considering establishing a private cemetery business. CFO Barry M. Deep states that business prospects are promising. The cemetery project is expected to generate a net cash inflow of $128,000 for the company in the first year, and the cash flows are anticipated to grow at a rate of 6.1% annually indefinitely. The project requires an initial investment of $1,510,000.
**Questions:**
**a.** If the company requires a return of 13% on such undertakings, what is the Net Present Value (NPV) of the project?
*(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)*
**b.** The company is uncertain about the assumed growth rate of 6.1% in its cash flows. What is the constant growth rate at which the company would break even if it still required a return of 13% on its investment?
*(Solve for “g” that makes the present value (PV) of the projected cash flows equal to the initial investment. The NPV will be $0.00. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)*
**Calculations:**
- **a.** NPV
- **b.** Minimum growth rate: ________%
Use the box provided to input your answers for the NPV and minimum growth rate.
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