Firm XHome is considering investing in a new project that would expand its private housing business in Hobart. The new project will provide a net cash inflow of $275 000 for the firm during the first year, and the cash flow are projected to grow at a rate of 5 percent per year forever. Suppose the project requires an initial investment of $7 500 000.
If the required rate of return is 9 percent, should the firm accept or reject the project?