The Chandler Group 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 $57,000 for the firm during the first year,and the cash flows are projected to grow at a rate of 7 percent per year forever.The project requires an initial investment of $759,000.The firm requires a 14 percent return on such undertakings.The company is somewhat unsure about the assumption of a 7 percent growth rate in its cash flows.At what constant rate of growth would the company just break even?
A)4.48 percent
B)5.29 percent
C)5.61 percent
D)6.49 percent
E)6.75 percent

Question

Quizplus · Accepted Answer

The minimum growth rate is the IRR as that is the rate that produces a zero NPV.

The Chandler Group Wants to Set Up a Private Cemetery