Get the answers you need from a community of experts on IDNLearn.com. Our experts are available to provide in-depth and trustworthy answers to any questions you may have.
An urban cooperative in Austin that supplies leafy greens and herbs to local restaurants and grocery stores is looking to expand their operation. The co-op would like to build an aquaponic system to increase their production of greens and also start producing tilapia. The new system would cost $39,800 to purchase and construct. The co-op projects that it will yield $420 of tilapia and $990 of leafy greens every week. Operating expenses are expected to increase by $38,000 annually due to fish nutrients, utilities, maintenance, and additional labor. Suppose that the workers wanted to evaluate this investment over a five-year period of time before committing. They expect that the components could be sold for $8,600 after five years of use. Taxes are expected to stay at 30% for the next six years. The IRS will allow the co-op to depreciate the system using straight line over 15 years. Assume that the terminal value of this investment is $8,600 at the end of five years. The co-op requires an 14% return to capital (pretax).
(i) Calculate the annual operating receipts
a. $35,320
b. $73,320
c. $38,000
d. $70,500
ENTER RESPONSE HERE:
(ii) Calculate the after tax- net returns
a. $28,625
b. $24,724
c. $28,256
d. $35,320
ENTER RESPONSE HERE:
(iii) Calculate the tax savings from depreciation
a. $796
b. $769
c. $531
d. $2,653
ENTER RESPONSE HERE:
(iv) Calculate the after-tax terminal value
a. $19,900
b. $12,187
c. $13,980
d. $8,600
ENTER RESPONSE HERE:
(v) Which discount rate should be used for calculating the NPV of this investment?
Thank you for being part of this discussion. Keep exploring, asking questions, and sharing your insights with the community. Together, we can find the best solutions. Your questions find answers at IDNLearn.com. Thanks for visiting, and come back for more accurate and reliable solutions.
