Bell Mountain Vineyards is considering updating its current manual accounting sy

Question

Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The Bell Mountainâs opportunity cost of capital is 14.8 percent, and the costs and values of investments made at different times in the future are as follows:

Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.10 million. This investment will consist of $2.90 million for land and $9.20 million for trucks and other equipment. The land, all trucks, and all other equipment is expected to be sold at the end of 10 years at a price of $5.10 million, $2.45 million above book value. The farm is expected to produce revenue of $2.01 million each year, and annual cash flow from operations equals $1.84 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 9 percent. Calculate the NPV of this investment. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)

Your answer is incorrect. Try again. Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The Bell Mountain's opportunity cost of capital is 14.8 percent, and the costs and values of investments made at different times in the future are as follows:

Explanation / Answer

2] ANNUAL CASHFLOW EACH YEAR = 1.84 MILLION

ADDITIONAL CASHFLOW AT THE END OF 10 YEARS = SALE OF INVESTMENT

CASHFLOW FROM SALE OF INVESTMENT AT THE END OF 10TH YEAR = SALES PROCCEDS

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