The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking u
p." As a result, the cemetery project will provide a net cash inflow of $97,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 4% per year for the following 5 years, at which time the business will be closed. The project requires an initial investment of $1,500,000. If Yurdone requires an 11% return, should the cemetery business be started? (Note: to calculate the next years cash flow, multiply last years cash flow by 1 + the growth rate. For example, cash flow for year 2 will be $97,000*(1+4%) = $100,880 ).
1 answer:
You might be interested in