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 $93,000 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 $1,460,000. a-1What is the NPV for the project if the required return is 10 percent? (A negative amount 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-2If the company requires a return of 10 percent on such undertakings, should the firm accept or reject the project? multiple choice AcceptReject b.The company is somewhat unsure about the assumption of a growth rate of 5 percent in its cash flows. At what constant growth rate would the company break even if it still required a return of 10 percent on investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

A. The present value can be calculated as follows : Results obtained :

Answered: he Yurdone Corporation wants to set up…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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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 $93,000 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 $1,460,000.

a-1	What is the NPV for the project if the required return is 10 percent? (A negative amount 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 a return of 10 percent on such undertakings, should the firm accept or reject the project?

	multiple choice

Accept
Reject


b.	The company is somewhat unsure about the assumption of a growth rate of 5 percent in its cash flows. At what constant growth rate would the company break even if it still required a return of 10 percent on investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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