Respond to the e-mail your colleague posted as if you were Tim O’Connell and share how you would proceed
January 9, 2021ERP systems within the context of implementation process, best-practices, difficulties, advantages
January 9, 2021
- Megadeth Inc. is considering expanding its local private cemetery business nation-wide. According to co-CEOs Dave Mustaine and David Ellefson, the business is “looking up”. The expansion will provide a net cash inflow of $127,000 during the first year. Messrs. Mustaine and Ellefson expect cash flows to increase 4% per year indefinitely citing the rationale that “…death is a growing business”. The project requires an initial investment of $1,700,000.
- If Megadeth Inc. requires an 11% hurdle rate for such undertakings, should they proceed with the private cemetery project?
- Megadeth’s CFO, Kiko Loureiro, is somewhat unsure about the 4% perpetual growth rate and asks you to determine the break-even growth rate based on the 11% hurdle rate.
