An investment has an installed cost of $673,658. The cash flows over the four-year life of the investment are projected to be $228,701, $281,182, $219,209, and $190,376.
Requirement 1:
If the discount rate is zero, what is the NPV? (Do not round intermediate calculations.)
NPV$ Requirement 2:
If the discount rate is infinite, what is the NPV? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.)
NPV$ Requirement 3:
At what discount rate is the NPV just equal to zero? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Discount rate %
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 $109,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 5.1 percent per year forever. The project requires an initial investment of $1,425,000.
Required:(a)
If Yurdone requires a return of 12 percent on such undertakings, what is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
NPV$ (b)Should the cemetery business be started? (Click to select)NoYes(c)
The company is somewhat unsure about the assumption of a growth rate of 5.1 percent its cash flows. At what constant growth rate would the company just break even if it still required a return of 12 percent on its investment? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimalplaces (e.g., 32.16).)
Minimum growth rate %
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