A farmer wants to establish a vineyard and the grape vines and trellising costs $425,000 establish and construct. The farmer already owns the land. In years 1, 2, 3, and 4 the vineyard has maintenance and production costs of $30,000 annually in order to care for the vines. Starting in year 5 the vineyard should earn an after-tax net income of $15,000 and in year 6, $30,000. From that point on it is expected to earn $90,000 annually for its expected life of 30 additional years when it will have no salvage value. The farmers cost of capital is 8 percent. 

1. Calculate the net present value. Then calculate the Internal Rate of Return.

2. In which financial statement (income statement, statement of owner's equity, balance sheet, or statement of cash flows) would the following items be found? Some items can appear on more than one statement. 

owner withdrawals

accounts payable

land

depreciation expense

accumulated depreciation

cash received from the sale of a hay baler

wheat sales

net income

accounts receivable

net increase or decrease in cash

labor expense

3. Arrange the items below in their proper order on an income statement and calculate net farm income from operations, net farm income, and net income.

Operating expenses	$390,000
Interest expense	30,000
Income taxes	40,000
Miscellaneous expense	5,000
Loss on the sale of a capital asset	20,000
Gross revenues	$550,000