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 $195,000 for the firm during the first year, and the cash flows areprojected to grow at a rate of 4 percent per year forever. The project requires an initial investment of $2.4 million.a-1. What is the NPV for the project if the company's required return is 11 percent?Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.NPVa-2. If the company requires an 11 percent return on such undertakings, should the cemetery business be started?NoO Yesb. The company is somewhat unsure about the 4 percent growth rate assumption in its cash flows. At what constant growth rate wouldthe company just break even if it still required a return of 11 percent on investment?Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.Constant growth rate%

Part a-1: Calculating the NPVTo calculate the NPV (Net Present Value), we need to use the formula…

Answered: The Yurdone Corporation wants to set up…

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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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 $94,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 3 percent per year forever. The project requires an initial investment of $1,470,000. a-1. What is the NPV for the project if the company's required return is 12 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV a- If the company requires a return of 12 percent on such undertakings, should the 2. cemetery business be started? No O Yes b. The company is somewhat unsure about the assumption of a growth rate of 3 percent in its cash flows. At what constant growth rate would the company just break even if it still required a return of 12 percent on investment? (Do not round…
Please provide correct solution for correct answer
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After analysing the financial data of Q-Constructions, you notice that they are trending in the right direction. A new 12-month construction proposal has come to the company worth $1,000,000 and an important question is whether it will be financially viable. They want you to analyse the proposal, in particular, the recommended cash flow schedule and to understand the key financial points during the construction project. The following cash flow schedule is summarised below. To ensure that all upfront and on-going outlay costs are covered in advance, Q-Constructions incur an initial start-up cost of $200,000. The proposal states that they will receive a deposit from the client of 10% of the total project price at the beginning. They then receive four equal instalment payments of 20% of the total project price associated to project milestones from the client at the end of the 2nd, 6th, 8th and 10th month. Finally, they receive the last 10% project milestone on lock-up which occurs at the…
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