Indian River Citrus (Financial management)

1. Should the $100,000 that was spent to rehabilitate the full treatment be allow in in the analysis? Explain. The $100,000 is a greet already occurred in the previous(prenominal) and it was decided on a stand-alone basis. The plant would make full away been rehabilitated regardless of what would happen with the project, just to protect the companionship?s property. This sunk cost should no way be included in the analysis. Of course the sequel would study been diametric if the plant hadn?t been rehabilitated and its rehabilitation was decided now for the causes of the project2.Suppose some other citrus tree producer had expressed an interest in leasing the lite orange juice production site for $25,000 a year. If this were true (in fact, it was not), how would that training be incorporated into the analysis?This development would cause just now a slight transport in the decision-making process. More unique(predicate) we would not propose realizing the plan if the mean(a) net cyberspace per year (including the cost of capital) leave be less than or equal to $25,000 which in fact shadow also be achieved with no risk at all. In shape to recommend realizing the project we should either be definite that our profit will be higher than our opportunity cost ($25,000), or have no better alternative to cloak the company?s capital.

Of course the above are validated only if in that respect is no cannibalization effect to our gross revenue from the other?s producer?s activities. In this case if we accept his proposal and we imitate this agreement lasts 4 age and the rent is bein g paid at the end of separately period we ! have a NPV of 79,246 , which is greater than the NPV of our project which is 23,720. So assuming equal look of the projects and no other side-effect we would opt to rent the site. If you want to sustain a full essay, order it on our website: OrderCustomPaper.com

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