Land opportunity cost, accounting assignment help
Land opportunity cost, accounting assignment help
5. WORST CASE SCENARIO
0 |
1 |
2 |
3 |
4 |
5 |
|
Land opportunity cost |
(500,000) |
|||||
Building |
(10,000,000) |
|||||
Net revenues |
3,750,000 |
3,862,500 |
3,978,375 |
4,097,726 |
4,220,658 |
|
Less labor cost |
800,000 |
824,000 |
848,720 |
874,182 |
900,407 |
|
Utilities |
50,000 |
51,500 |
53,045 |
54,636 |
56,275 |
|
Supplies |
1,500,000 |
1,545,000 |
1,591,350 |
1,639,091 |
1,688,263 |
|
Incremental overhead |
36,000 |
37,080 |
38,192 |
39,338 |
40,518 |
|
Net income |
1,364,000 |
1,404,920 |
1,447,068 |
1,490,480 |
1,535,194 |
|
Plus : net land salvage value |
500000 |
|||||
Plus : net bldng/eqp value |
3000000 |
|||||
Net cash flow |
(10,500,000) |
1,364,000 |
1,404,920 |
1,447,068 |
1,490,480 |
5,035,194 |
NPV = $ (2,867,228.81)
IRR 0.62%.
Payback period 4.95.
Best case scenario.
best case |
0 |
1 |
2 |
3 |
4 |
5 |
Land opportunity cost |
(500,000) |
|||||
Building |
(10,000,000) |
|||||
Net revenues |
6,250,000 |
6,437,500 |
6,630,625 |
6,829,544 |
7,034,430 |
|
Less labor costs |
800,000 |
824,000 |
848,720 |
874,182 |
900,407 |
|
Utilities |
50,000 |
51,500 |
53,045 |
54,636 |
56,275 |
|
Supplies |
2,500,000 |
2,575,000 |
2,652,250 |
2,731,818 |
2,813,772 |
|
Incremental overhead |
36,000 |
37,080 |
38,192 |
39,338 |
40,518 |
|
Net income |
2,864,000 |
2,949,920 |
3,038,418 |
3,129,570 |
3,223,457 |
|
Plus : net land salvage value |
500000 |
|||||
Plus : net building/equipment value |
7000000 |
|||||
Net cash flow |
(10,500,000) |
2,864,000 |
2,949,920 |
3,038,418 |
3,129,570 |
10,723,457 |
NPV $ 5,620,356.65
IRR 25.11%
Payback period 3.86.
Expected NPV = 70%* 1,376,563.92 + 15%*5,620,356.65 + 15 %*( 2,867,228.81) =$1,376,563.92.