Task1. The Yurdone Corporation desires to set up the private cemetery business. According to the CFO, Barry M. Deep, business is "looking up". As a result, the cemetery project will offer net cash inflow of $95,000 for the firm throughout the first year, and the cash flows are projected to grow at a rate of 4 percent per year forever. The project needs an initial investment of $1,480,000.
problem1. What is the NPV for the project if Yurdone's required return is eleven percent?
problem2. If Yurdone needs a return of 11 percent on such undertakings, should the firm admit or reject the project?
problem3. The company is somewhat uncertain regarding the assumption of a four percent growth rate in its cash flows. At what stable growth rate would the company just break even if it still required a return of eleven percent on investment?