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Old 12-10-2017, 08:01 PM
Ryeguy12 Ryeguy12 is offline
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Join Date: Dec 2017
Posts: 1
Default NPV case study question

Good Evening, below i am working on the investment options, NPV calc isnt my confusion, its around the market size, production of farm 1, looking quickly it looks 2 million bunches in production, at 30 dollars pricing, showing 60 million in revenue, but only selling for $700,000?? again not worried about the NPV calc, both farms look ideal based on the NPV calc,, just want another pair of eyes to review

Thanks!

Problem:

You are representing an investment arm who is considering entering the flower market within New Zealand. This market is of interest because there are a number of flower farmers selling their farms as they are seeking brighter opportunities in the nearby markets of Papua New Guinea, Fiji and Tonga. The New Zealand flower market closely tracks population and the latest migration figures show that New Zealand is declining in population by 2% per annum.

However, you know that the market price for flowers in New Zealand is about to significantly change as you have heard from your neighbor who knows an Australian entrepreneur who is about to purchase the largest flower farm in the New Zealand market. The Australian entrepreneur is thought to be repurposing the flower farm with an intent to grow soybeans which will supply the Chinese economy as well as create a renewable fuel stock which will supply and displace traditional fossil fuels within the New Zealand economy.

Your job is to consider the investment appraisal of two potential flower farms which you know are for sale. You will need to develop a financial model to evaluate the financial return and risk associated with the two projects.

You will need to present your analysis and recommendation for your preferred investment option(s) and explain your assumptions and rationale.

Your financial model should consider post-tax, unlevered cash flows and calculate NPV and IRR. Your recommendation should consider, but not be limited to

- The overall financial return
- The potential variability of returns
- The overall market for flowers as well as optionality for your investment

Generic Assumptions:

- NZ Market demand. 6,000,000 bunches per year, declining by 1%
- NZ Market supply. 6,100,000 bunches per year plus/minus 5%
- 6 farms service the market. The largest farm (2,500,000 bunches per year) could be repurposed into a soy bean operation
- Forecast Wholesale price of flowers ($ per bunch), assuming all 6 farms remain in operation
o Yr1. 30.00
o Yr2. 32.00
o Yr3. 28.0
o Yr4 33.00
o Yr5 29.00
- NZ is the middle of the Pacific Ocean and flowers fresh flowers canít be transported
- The Australian entrepreneur has a track record of successful projects
- NZ is a relatively safe investment destination and attracts a cost of capital of 10%
- NZ is aiming to attract investors and has recently passed legislation to lower the corporate tax rate to 5%

Farm 1
- Production (per 100 000 bunch)
o Yr1. 20
o Yr2. 18
o Yr3. 22
o Yr4. 20
o Yr5. 20
- Purchase Price. $700,000
- Cost. $15.00 per bunch (flat)
- Lowest cost producer in the market

Farm 2
- Production (per 100 000 stems)
o Yr1. 5
o Yr2. 12
o Yr3. 6
o Yr4. 17
o Yr5. 10
- Purchase Price. $200,000
- Cost. $20.00 per 100 stems (flat)
- Second highest cost producer in the market

Please forecast your financial model over a 15 years period. Use your best estimate, based on prior history, to determine the forecast production and price in Years 6 to 15. The decision to apply a terminal value in yr15 is for you to consider. Please state your assumption and why you do (or donít) believe a terminal value will apply in this circumstance.
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Old 07-03-2018, 06:00 PM
SunnyMay SunnyMay is offline
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Join Date: Sep 2016
Posts: 148
Default Re: NPV case study question

I need find out one thing about https://domycasestudy.com/, can those guys write papers in languages other than English, my friend is from France, he is to write an essay but want to have it done for him, can they write it in French, does anyone know this? I think they ought to have somebody capable of doing this!
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