Bunyan Lumber

Bunyan Lumber LLC Joelle Yeager Bus640: Managerial Finance Professor Claudine Carew June 18, 2012 When should Bunyan Lumber, collect-tide the forest?   grand flow will grow at the inflation gage of 3.7%.   If one were to utilizing the real cash flow formula R will equal 6.08% (1+R) =v (1+R) (1+H) 1.10 = (1+R)(1.037) R= 6.08% Conservation capital will grow slower than the inflation calculate so return for the preservation lineage will be R will equal 6.5% (1+R) = (1+R) (1+H) 1.10 = (1+R) (1.032) R= 6.5% The cash flow from the minute process is: Cash flow from newspaper clipping = Acres cut x cash flow per acre Cash flow from thinning = 7,500 ($1,200) Cash flow from thinning = $9,000,000 After tax be of the saving parentage will be, After tax saving fund cost = (1C.35) ($250,000) After tax conservation fund cost = $162,500 40 year harvest schedule: tax $39,800,250 Tractor cost 7,200,000 Road 2,700,000 Sale preparation & administ ration 945,000 power shovel piling 1,200,000 Broadcast burning 2,287,500 Site preparation 1162,500 amaze costs 1,800,000 EBIT $22,505,250 Taxes 7,876,838 Net income (OCF) $ 4,628,413 First harvest afterward 20 long time PV First = $14,628,413/ (1+ .

0608)20 PV First = $4,496,956 Projection of thinning after 40 years 40-year protrude relate rate = [(1+ .0608)40] ¨C1 40-year project interest rate = 958.17% 40-year conservation interest rate = [(1++ .0659)40] ¨C 1 40-year conservation interest rate = 1,183.87% PVThinning = $9,000,000/9.8517 PVThinning = $939,286.45 The 40-year schedule in operation(p) cash from each harvest: PVHarvest = [($14,628,413/9.5817)] / (1 + .0608)20 PVHarvest = $469,325.52 Th! e present value of the conservation fund deposits will be in 20 years: PVConservation = ¨C$162,500 ¨C$162,500/11.8387 PVConservation = ¨C$176.226.22 This makes the value of the fund: PVConservation = ¨C$176,226.22/(1+ .0659)20 PVConservation = ¨C$49,182.52 So, the NPV of a 40-year harvest schedule is:...If you want to set a full essay, stray it on our website: OrderEssay.net

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