Financediscussion5.txt

Module 5: Discussion Question

Start by reading and following these instructions:

You are responsible for minimally at least 3 posts for each question in your discussion boards; your initial post and reply to two of your classmates. Your initial post(s) should be your response to the questions posed in the discussion question. You should research your answer and cite at least one scholarly source when appropriate, and always use quality writing. The discussion board is never a place to use text language or emoticons. You will also be asked to respond to your classmates. This is designed to enhance the academic discussion around the topic. It is all right to disagree with something posted by another, however your responses should always be thoughtful and respectful and reflect your opinions professionally.

Discussion Question:

NPV Valuation. 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.

a. If Yurdone requires a return of 12 percent on such undertakings, should the cemetery business be started?

b. The company is somewhat unsure about the assumption of a 5.1 percent growth rate in 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?

When you are ready for the discussion, do the following:

Click on the discussion link above.
Start your answer by clicking “Start a New Thread” button with the title of your answer and the body of text following the guidance above.
To properly post your answer, please click on the “Post” button.
After posting your contribution, read what others have posted, reply to at least two of those posts, and respond (when appropriate) to those who have responded to you.
To reply to a classmate’s post:

Click on the title of another student’s post.
Click “Reply to Thread” and type your response to the student.
Click the “Post” button to post your reply.