1 answer

11). Net cash flow (year 1) $            31,000 Cash flow growth per year 4.5% Initial investment $       1,050,000...

Question:

11).

Net cash flow (year 1)

$            31,000

Cash flow growth per year

4.5%

Initial investment

$       1,050,000

Required return

10%

.

Calculate the breakeven growth rate for the company?


Answers

Break even growth rate is the rate at which Initial investment is equal to the present value of cash inflows

1,050,000 = 31000/(10%-growth rate)

Growth rate = 7.0476%

i.e. 7.05%

.

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