Indian River Citrus (Financial management)

1. Should the $100,000 that was spent to rehabilitate the full treatment be accept in the analysis? Explain. The $100,000 is a cost already occurred in the previous(prenominal) and it was decided on a stand-alone basis. The plant would request away been rehabilitated regardless of what would happen with the project, just to protect the friendship?s property. This sunk cost should no way be included in the analysis. Of course the suit of clothes would study been disparate if the plant hadn?t been rehabilitated and its rehabilitation was decided now for the causes of the project2.Suppose another(prenominal) 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 selective information would cause just now a slight diverseness in the decision-making process. More unique(predicate) we would not propose realiz ing the plan if the amount net cyberspace per year (including the cost of capital) leave be less than or equal to $25,000 which in fact prat also be achieved with no risk at all. In severalize to recommend realizing the project we should either be accredited that our profit will be higher than our opportunity cost ($25,000), or have no better alternative to indue the company?s capital.

Of course the above are legitimate only if in that respect is no cannibalization effect to our gross sales from the other?s producer?s activities. In this case if we accept his proposal and we imitate this agreement lasts 4 eld and the rent is being 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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