BUS 640--WEEK2_CH9 BUNYAN LUMBER - Bunyan Lumber LLC Bus640 Managerial Finance When should Bunyan Lumber harvest the forest Cash flow will grow at the

BUS 640--WEEK2_CH9 BUNYAN LUMBER - Bunyan Lumber LLC Bus640...

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Bunyan Lumber LLCBus640: Managerial FinanceWhen should Bunyan Lumber, harvest the forest?
40-year conservation interest rate = 1,183.87%PVThinning = $9,000,000/9.8517PVThinning = $939,286.45The 40-year schedule operating cash from each harvest:PVHarvest = [($14,628,413/9.5817)] / (1 + .0608)20PVHarvest = $469,325.52The present value of the conservation fund deposits will be in 20 years:PVConservation = ¨C$162,500 ¨C$162,500/11.8387PVConservation = ¨C$176.226.22This makes the value of the fund:PVConservation = ¨C$176,226.22/(1+ .0659)20PVConservation = ¨C$49,182.52So, the NPV of a 40-year harvest schedule is:NPV = $4,496,956 + 939,286.45 + 469,325.52 ¨C 49,182.52NPV = $5,856,385.2945-year harvest schedule:Revenue $55,462,853Tractor cost 9,840,000Road 3,690,000Sale preparation & admin 1,291,500Excavator piling 1,200,000Broadcast burning 2,287,500Site preparation 1,162,500Planting costs 1,800,000

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