Indian River Citrus (Financial management)

1. Should the $100,000 that was spent to rehabilitate the full treatment be involve in the analysis? Explain. The $100,000 is a salute already occurred in the previous(prenominal) and it was decided on a stand-alone basis. The plant would mother away been rehabilitated regardless of what would happen with the project, just to protect the political party?s property. This sunk cost should no way be included in the analysis. Of course the possibility would study been variant if the plant hadn?t been rehabilitated and its rehabilitation was decided now for the causes of the project2.Suppose 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 instruction would cause just now a slight transfigure in the decision-making process. More unique(predicate) we would not propose realizing the plan if the m iddling net cyberspace per year (including the cost of capital) leave be less than or equal to $25,000 which in fact behind also be achieved with no risk at all. In auberge to recommend realizing the project we should either be certain that our profit will be higher than our opportunity cost ($25,000), or have no better alternative to come out the company?s capital.

Of course the above are valid only if in that respect is no cannibalization effect to our sales from the other?s producer?s activities. In this case if we accept his proposal and we imitate this agreement lasts 4 years and the rent is being pai d at the end of to each one 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 take to rent the site. If you want to sustain a full essay, order it on our website: OrderCustomPaper.com

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