What is the present value of the tree planting cost

Reference no: EM131972901

Question: The family woodland property is being sold by your parents who are retiring. Your siblings and you decide to purchase the farm to keep it in the family. The plan is to purchase the land and make a number of forest management investments, with the intent of generating income from timber and leasing the hunting rights. Provide excel sheet.

Your estimated costs and returns are as follows:

• $900/acre purchase price of land, paid back annually in equal installments over 10 years @ 6% annual interest.

• $300/acre tree planting costs incurred 1 year after purchase.

• $1000/acre forest management costs 3 years after purchase.

• $50/acre forest management costs in starting 5 years after purchase and continuing until 10 years after purchase (years total).

• Annual hunting lease of $100/acre beginning in years 6 years after purchase and continuing until 15 years after acquiring the land.

• $5/acre/year in property taxes and liability insurance, beginning immediately and paid each year you own the land.

• $3,000/acre income from the sale of timber 15 years after acquiring the land.

• $1,200/acre from the sale of your forest land 16 years after acquiring the land. You sell your land on the last day of this year.

• Your ARR is 4%.

A- What is the present value of the tree planting cost?

B- What is the present value cost of the $1,000 forest management cost?

C- What is the present value of the revenue generated from selling the forest land?

D- What is the present value of the 1st payment received for the hunting lease?

E- What is your annual payment for the loan you took out to purchase the land?

F- What is the present value of the 5th loan payment?

G- What is the present value of the revenue generated from timber harvesting?

H- What is the NPV of revenue and costs in the year you sell the forest land?

I- What is the net present value of revenue and costs incurred in year 10?

J- What is the net present value of revenue and costs incurred in year 10?

K- What is the net present value of revenue and costs incurred in year 11?

L- What is the discounted sum of revenue and costs in year 3?

Reference no: EM131972901

Questions Cloud

Ideal starbucks customer from a profitability standpoint : How does the Starbucks of 2002 differ from the Starbucks of 1992? Describe the ideal Starbucks customer from a profitability standpoint.

Find the company target debt-equity ratio : Fama's Llamas has a weighted average cost of capital of 11.5 percent. The company's cost of equity is 16 percent, and its pretax cost of debt is 8.5 percent.

Write down essay on topic - Bullying : Write essay on topic of 2000 words. Topic - Bullying. My sub topic is - Australia experience of laws and experience on cyber bullying

What was the company net operating working capital : Falcon Sky's balance sheet showed total current assets of $4.250,000, all of which were required in operations. Its current liabilities consisted.

What is the present value of the tree planting cost : What is the present value of the tree planting cost? What is the present value cost of the $1,000 forest management cost?

Calculate the net cost of the equipment in pv terms : Your company is purchasing a new piece of equipment for $35,000 and will keep it indefinitely. For accounting purposes, the equipment will be depreciated.

Discuss about the exporters incorporated hedge : Exporters Incorporated is a multinational firm that exports to countries around the world. One country the firm exports to is the Great Britain.

Discuss the role of paul in shaping the theological tenets : Introduction to the New Testament - Discuss the role of Paul in shaping the theological tenets and religious practices of early Christianity

What is the implied going-in capitalization rate : What is the total present value of the property? Calculate and explain. What is the implied going-in capitalization rate? Calculate and explain.

User Account

All Pages