How Does Mr Boles Begin With The Future Value Of Revenue
Running Head: Chapter 9 Closing Case-Bunyan
Your Name
BUS650: Managerial Finance
Dr. Stanley Atkinson
January , 2013
The question asked of us this week sounds so simple “When should the company harvest the forest?” however as you begin to answer the question you discover just how complex it really is. In order to forecast correctly Mr. Boles must compute many different factors.
REVENUES
Mr. Boles should begin with the future value of revenue. The formula is the MBF per acre multiplied by total acres to be harvested multiplied by timber grade multiplied by future value factor. This is much easier in a table; I have included the table for 20 year revenues:
20 YEAR REVENUES | …show more content…
If we look at the contribution rate for the years identified we can see that the contribution margin goes up the longer we don’t harvest the timber.
NPV
Attached is a table that Mr. Boles will need to analyze all four years to determine the NPV for all four periods to determine when would be the best time to harvest the land.
| YEAR 20 | YEAR 25 | YEAR 30 | YEAR 35 |
REVENUES | 61,115,963 | 96,227,011 | 139,073,614 | 180,517,988 |
VARIABLE COSTS | 12,746,700 | 16,641,525 | 20,005,238 | 21,598,575 |
FIXED COSTS | 563,268 | 659,346 | 771,813 | 903,464 |
DEPRECIATION | 580,500 | 606,300 | 911,063 | 983,625 |
PRETAX PROFIT | 47,225,495 | 78,319,840 | 117,385,501 | 157,032,324 |
TAX | 16,528,923 | 27,411,944 | 41,084,925 | 54,961,314 |
NET PROFIT | 30,696,572 | 50,907,896 | 76,300,576 | 102,071,011 |
CASH FLOW | 31,277,072 | 51,514,196 | 77,211,638 | 103,054,636 |
INITIAL INVESTMENT | 11,610,000 | 15,157,500 | 18,221,250 | 19,672,500 |
CONTRIBUTION MARGIN | 8,767 | 14,425 | 21,581 | 28,803
Your Name
BUS650: Managerial Finance
Dr. Stanley Atkinson
January , 2013
The question asked of us this week sounds so simple “When should the company harvest the forest?” however as you begin to answer the question you discover just how complex it really is. In order to forecast correctly Mr. Boles must compute many different factors.
REVENUES
Mr. Boles should begin with the future value of revenue. The formula is the MBF per acre multiplied by total acres to be harvested multiplied by timber grade multiplied by future value factor. This is much easier in a table; I have included the table for 20 year revenues:
20 YEAR REVENUES | …show more content…
If we look at the contribution rate for the years identified we can see that the contribution margin goes up the longer we don’t harvest the timber.
NPV
Attached is a table that Mr. Boles will need to analyze all four years to determine the NPV for all four periods to determine when would be the best time to harvest the land.
| YEAR 20 | YEAR 25 | YEAR 30 | YEAR 35 |
REVENUES | 61,115,963 | 96,227,011 | 139,073,614 | 180,517,988 |
VARIABLE COSTS | 12,746,700 | 16,641,525 | 20,005,238 | 21,598,575 |
FIXED COSTS | 563,268 | 659,346 | 771,813 | 903,464 |
DEPRECIATION | 580,500 | 606,300 | 911,063 | 983,625 |
PRETAX PROFIT | 47,225,495 | 78,319,840 | 117,385,501 | 157,032,324 |
TAX | 16,528,923 | 27,411,944 | 41,084,925 | 54,961,314 |
NET PROFIT | 30,696,572 | 50,907,896 | 76,300,576 | 102,071,011 |
CASH FLOW | 31,277,072 | 51,514,196 | 77,211,638 | 103,054,636 |
INITIAL INVESTMENT | 11,610,000 | 15,157,500 | 18,221,250 | 19,672,500 |
CONTRIBUTION MARGIN | 8,767 | 14,425 | 21,581 | 28,803