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 $ 60,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 6 % per year forever. The project requires an initial investment of $ 925,000.
a) if Yurdone requires a 13 % return on such undertakings, should the cemetery business be started?
b) The company is somewhat unsure about the assumption of a 6 % growth rate in its cash flows. At what constant growth rate would the company just break even if it still required a 13 % return on investment?