Chapter 9

Chapter 9 closing movement Ashford University BUS 650 Managerial Finance When should Bunyan Lumber, garner the forest? The specie precipitate pass on grow at the inflation gait of 3. 7%. Utilizing the genuine silver move formula (1+R) =v (1+R)(1+H) 1. 10 = (1+R)(1. 037) R= 6. 08% The saving computer memorys be anticipated to grow slower than the inflation outrank. The cede for the saving investment trust will be, (1+R) = (1+R) (1+H) 1. 10 = (1+R) (1. 032) R= 6. 5% The cash flow from the cutting process is as follow, Cash flow from thinning = Acres thinned x cash flow per acre Cash flow from thinning = 7,500 ($1,200) Cash flow from thinning = $9,000,000 carving beyond the sign thinning is conducted on a schedule and can be included. afterward value monetary value of the saving fund will be, After tax saving fund court = (1C. 35) ($250,000) After tax preservation fund cost = $162,500 For each analysis the cost and revenue are revenue E (% of grade )( increase-t ide per acre)(value of board game)(acres collected) (1C defect value) Tractor cost = (Cost MBF)(MBF per acre)(acres) lane cost = (Cost MBF)(MBF per acre)(acres) exchange cooking and administration = (Cost MBF) (MBF acre) (acres) It is assumed that there is no depreciation as a result of the yield.This is an indicator that operating cash flow is equal to net income. The NPV of the thinning, the NPV of all future ingathering-feasts, minus the return value ofthe preservation fund cost. Revenue $39,800,250 Tractor cost 7,200,000 Road 2,700,000 Sale preparation & admin 945,000 power shovel piling 1,200,000 Broadcast suntan 2,287,500 Site preparation 1162,500 Planting costs 1,800,000 EBIT $22,505,250 Taxes 7,876,838 Net income (OCF) $ 4,628,413 archetypal harvest after 20 twelvemonths PV First = $14,628,413/ (1+ . 0608)20 PV First = $4,496,956 Projection of thinning after 40 years 40-year project stakes rate = (1+ . 0608)40 ? C1 0-year project use up rate = 958. 17% 40-year c onservation engross rate = (1+ . 0659)40 ? C1 40-year conservation interest rate =1,183. 87% demo value of future thinning on this schedule, which will be PV Harvest = ($ 14,628,413/9. 5817) / (1+ . 0608)20 PV Harvest = $469,325. 52 exhibit value of conservation funds deposit PV preservation = ? C$162,500 ? C$162,500/11. 8387 PV preservation = ? C$176. 226. 22 Current value of conservation PV conservation = ? C$176,226. 22/ (1+ . 0659)20 PV Conservation = ? C$49,182. 52 NPV of a 40-year harvest schedule is NPV = $4,496,956 + 939,286. 45 + 469,325. 52 ? C9,182. 52 NPV = $5,856,385. 9 45-year harvest schedule Revenue $55,462,853 Tractor cost $9,840,000 Road $3,690,000 Sale preparation & admin $1,291,500 Excavator piling $1,200,000 Broadcast burn down $2,287,500 Site preparation $1,162,500 Planting costs $1,800,000 EBIT $34,191,353 Taxes $11,966,973 Net income (OCF) $22,224,379 The PV of the first harvest in 25 years is PV first = $22,224,379/ (1+ . 0608) 25PVFirst = $5, 087, 23 4 5 year interest rate 45-year project interest rate = (1+ . 0608)45 ? C1 45-year project interest rate =1,321. 11% 45 year interest rate for the conservation fund 45-year conservation interest rate = (1+ . 0659)45 ? C1 5-year conservation interest rate = 1,666. 38% PV of future thinning PV Thinning = $9,000,000/13. 111 PV Thinning = $681,246. 84 Utilizing the OCF of $22,024,504, the PV are as follow, PV Harvest = ($22,224,379/13. 21111) / (1+ . 0608)25 PV Harvest = $385,073. 30 The present value of these deposits is PV Conservation = ? C$162,500 ? C $162,500/16. 6638 PV Conservation = ? C$174,800. 29 NPV of a 45-year harvest schedule is NPV = $5,087,231+ 681. 246. 84 + 385,073. 30 ? C 35, 458, 26 NPV = $6, 1118,092. 40 50-year harvest schedule Revenue $64,610,783 Tractor cost $11,280,000 Road $4,230,000 Sale preparation & admin $1,480,500Excavator piling $1,200,000 Broadcast burning $2,287,500 Site preparation $1,162,500 Planting costs $1,800,000 EBIT $41,170,283 Taxes $14,409,599 Ne t income (OCF) $26,760,684 The PV of the first harvest in 30 years is PV First = $26,760,684/ (1+ . 0608)30 First = $4,561,202 The effective 50-year interest rate for the project is 50-year project interest rate = (1+ . 0608)50 ? C1 50 year project interest rate=1,808. 52% 50 year interest rate for the conservation funds 50-year conservation interest rate = (1+ . 0659)50 ? C1 50-year conservation interest rate = 2,330. 24% perplex value of future thinning on this schedule, which will bePV Thinning = $9,000,000/18. 0852 PV Thinning = $497,644. 82 The operating cash flow from each harvest on the 50-year schedule is $26,531,559, so the present value of the cash flows from the harvest are PV Harvest = ($26,760,684/18. 0852 / (1+ . 0608)30 PV Harvest = $497,644. 82 hand value of the conservation fund deposits PV Conservation = ? C$162,500 ? C $162,500/23. 3024 PVConservation? C$171,485. 25 right aways conservation value PV Conservation = ? C$171,485. 25/ (1+ . 0659)30 PV Conservation = ? C$25,283. 50 NPV of a 50-year harvest schedule is NPV = $4,561,202 + 497,644. 82 + 252,206. 52 ? C 25,283. 0 NPV = $5,285,770. 21 55-year harvest schedule Revenue $72,972,113 Tractor cost $12,600,000 Road $4,725,000 Sale preparation & admin $1,653,750 Excavator piling $1,200,000 Broadcast burning $2,287,500 Site preparation $1,162,500 Planting costs$1,800,000 EBIT $47,543,363 Taxes $16,640,177 Net income (OCF) $30,903,186 First harvest in 35 years PV First =$30,903,186/ (1+ . 0608)35 PV First = $3,922,074 Thinning 55 years from today 55-year project interest rate = (1+ . 0608)55 ? C1 55-year project interest rate = 2,463. 10 55 year conservation fund 55-year conservation interest rate = (1+ . 0659)55 ? C1 5-year conservation interest rate = 3,243. 60% Present value of future thinning PV Thinning = $9,000,000/24. 6310 PV Thinning = $365,392. 74 Present values of the cash flows from the harvest are PV Harvest = ($30,903,186/24. 6310 / (1+ . 0608)35 PV Harvest = $159,233. 03 Presen t value of the conservation fund deposits PV Conservation = ? C$162,500 ? C $162,500/32. 4360 PV Conservation = ? C$169,097. 37 Todays value of the conservation fund PV Conservation = ? C$169,097. 37/(1+ . 0659)35 PV Conservation = ? C$18,121. 00 NPV of a 55-year harvest schedule NPV = $3,922,074 + 365,392. 74 +159,233. 03 ? C18, 121. 00 NPV = $4,428,578. 40