Question
In: Finance
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 $145,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 4 percent per year forever. The project requires an initial investment of $1,900,000. | |
| a-1. | What is the NPV for the project if the company's required return is 11 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.) |
| a-2. | If the company requires an 11 percent return on such undertakings, should the cemetery business be started? |
| b. | The company is somewhat unsure about the 4 percent growth rate assumption in its cash flows. At what constant growth rate would the company just break even if it still required a return of 11 percent on investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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 $102,000 for the firm during the first year, and the cash
flows are projected to grow at a rate of 5 percent per year
forever. The project requires an initial investment of
$1,550,000.
a-1 What is the NPV for the project if the company's required...
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 $98,000 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
$1,510,000.
a-1
What is the NPV for the project if the company's...
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...
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 $101,000 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
$1,540,000.
a-1
What is the NPV for the project if Yurdone's required...
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 $107,000 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
$1,600,000.
a-1
What is the NPV for the project if the required...
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 $164,000 for the firm during the first year, and the cash
flows are projected to grow at a rate of 4.7 percent per year
forever. The project requires an initial investment of
$1,825,000.
a.
If Yurdone requires a return of 12 percent on such undertakings,...
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