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

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)

What is the NPV for the project if the company's required return is 12 percent?

B) Yes or No: If the company requires a return of 12 percent on such undertakings, should the cemetery business be started?

C) 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?

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jeff jeffy answered 10 months ago
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