1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Serga [27]
2 years ago
11

During the past year, Stacy McGill planted a new vineyard on 150 acres of land that she leases for $30,000 a year. She has asked

you as her accountant to assist her in determining the value of her vineyard operation. The vineyard will bear no grapes for the first 5 years (1–5). In the next 5 years (6–10), Stacy estimates that the vines will bear grapes that can be sold for $60,000 each year. For the next 20 years (11–30) she expects the harvest will provide annual revenues of $110,000. But during the last 10 years (31–40) of the vineyard’s life, she estimates that revenues will decline to $80,000 per year. During the first 5 years the annual cost of pruning, fertilizing, and caring for the vineyard is estimated at $9,000; during the years of production, 6–40, these costs will rise to $12,000 per year. The relevant market rate of interest for the entire period is 12%. Assume that all receipts and payments are made at the end of each year.
Business
1 answer:
Ivenika [448]2 years ago
6 0

Based on the various costs that Stacy McGill will incur, and the present value of her revenue, the minimum price that Stacy should accept from Ric Button is $376,595.

<h3>What amount should Stacy accept?</h3>

This should be the net present value of her vineyard over 40 years.

Present value of revenue from 1 - 5 years is $0 because no grapes will be grown in the vineyard.

Present value of revenue from 6 - 10 years;
= 60,000 x 3.14772

= $188,863.20

Present value of revenue from 11 - 30 years

= 110,000 x 6.40475

= $704,522.50

Present value of revenue from 31 to 40 years:

= 80,000 x 1,28146

= $102,516.80

Then find the present value of the expenses:

Present value of expenses from 1 - 5 years:

= 9,000 x 4.21236

= $37,911.28

Present value of expenses from 6 - 40 years:

= 12,000 x 10.83393

= $130,007.16

Present value of lease:

= 30,000 x 15.04629

= $451,388.70

The minimum amount Stacy should sell for is therefore:

= 188,863.20 + 704,522.50 + 102,516.80 - 37,911.28 -  130,007.16 - 451,388.70

= $376,595.

Question is:

Eric Button has offered to buy Stacy’s vineyard business by assuming the 40-year lease. On the basis of the current value of the business, what is the minimum price Stacy should accept?

Find out more on net present value at brainly.com/question/17185385

#SPJ1

You might be interested in
Is the national interest a reliable source
timurjin [86]
Not all of the time because it can be very biased
3 0
3 years ago
After segmenting and defining their target​ markets, what should retailers do​ next?
DIA [1.3K]
After the segmenting and defining their target markets, the next step that the retailers should take into consideration is the type of goods that they are going to sell. This answers the question, "What?" For example, being located near the schools, their target market are the students and they should also consider what type of goods are the students mostly in need of. 
4 0
3 years ago
Read 2 more answers
On July 1, Hartford Construction purchases a bulldozer for $228,000. The equipment has a 9-year life with a residual value of $1
UkoKoshka [18]

Answer:

a. Depreciation expense per hour:

= (Cost - salvage value) / Expected operating hours

= (228,000 - 16,000) / 26,500

= $8 per hour

b. First year depreciation:                                      Second year depreciation:

= 1,250 * 8                                                                  = 2,755 * 8

= $10,000                                                                   = $22,040

Third year depreciation:

= 1,225 * 8

= $9,800

Journal entries

Date                    Account Title                                    Debit                 Credit

June 30, Year 1 Depreciation                                     $10,000

                          Accumulated Depreciation                                       $10,000

Date                       Account Title                                   Debit                 Credit

June 30, Year 2     Depreciation                                 $22,040

                              Accumulated Depreciation                                  $22,040

Date                       Account Title                                   Debit                 Credit

June 30, Year 3     Depreciation                                 $9,800

                              Accumulated Depreciation                                  $9,800

4 0
3 years ago
Bruce, a buyer, contracted with Steve, a seller, to buy ten dozen bicycle tires for $960. Payment was due thirty days after deli
umka2103 [35]

Answer:

b. Hold the tires with reasonable care for disposition as the seller instructs.

Explanation:

When goods are non-conforming to contract, the buyer has the right to reject the goods. The seller also has the right to cure the defect or ensure conformity.

1. Buyer's right to reject: In this case the buyer has the right to reject the goods on inspection, and notify the seller within a reasonable amount of time.

2. Seller's right to cure: The seller has the right to cure defect on the goods, and this can be done where there is still time to rectify the defects noticed by the buyer. In this case, the buyer is not due to pay for the goods for the next 30 days.

The seller still has the opportunity to meet the contract standard and close the deal.

So option b is correct. The buyer holds the goods pending decision of seller to either cure defects on goods or retrieve the goods.

7 0
3 years ago
The purpose of a financial intermediary is to help channel funds
Triss [41]

Answer:

a. from one banks to another

Explanation:

3 0
3 years ago
Other questions:
  • Explain the term “Flag of Convenience" and how it might affect International Business.
    9·1 answer
  • Deployment Specialists pays a current (annual) dividend of $1 and is expected to grow at 20% for two years and then at 3% therea
    14·1 answer
  • If GDP is $12,000 and velocity is 4, the money supply is
    8·1 answer
  • Mix Sweet Shop bakes and sells pies. Mix has annual fixed costs of​ $880,000 and a variable cost per pie of​ $7.50. Each pie sel
    7·1 answer
  • Strategic fit among the many activities in the value chain is critical for competitive advantage because it is more difficult fo
    10·1 answer
  • In order to obtain a permit to run a new operation, food establishments must___.
    8·1 answer
  • Which of the following correctly explains the crowding-out effect?
    8·1 answer
  • Background information: In 2012, President Obama and Congress debated the issue of taxes and tax cuts.
    5·2 answers
  • Which career is best described by someone who buys materials, products, and services for an organization?
    15·2 answers
  • A lack of business ethics can result in a lack of business goodwill is ture or flase?
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!