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Financials for this case study? Case 36 Brown's Nursery (Part A) Jo Brown's nursery operation has grown from a small a thriving nursery herb plot
Financials for this case study?
Case 36 Brown's Nursery (Part A) Jo Brown's nursery operation has grown from a small a thriving nursery herb plot into business. There are 10 full-time employees and 20 seasonal (part-time) employees. For the last three years taxable income for Brown's Nursery has been steady at $350,000 per year While Jo is pleased with the current success of the nursery, she is considering a new contract to supply a local grocery chain with fresh herbs year round. The grocery chain's current supplier is retiring in a year and is planning to sell his business to one of the other grocery chains he also supplies. Rather than assigning a large portion of her current capacity to this contract, she is considering expanding production. Jo has been offered a 5-year contract, starting in l year To service this new contract without reducing current operations requires purchasing an adjacent piece of land and constructing additional greenhouse space. The property can be purchased for $200,000. The most economical solution to the greenhouse addition is to construet two modular greenhouses for $70,000 each. The modular greenhouses have a useful life of 12 years and a $5000 salvage value startup expenses are expected to be s22.500 The purchase of the land, construction of the greenhouses, and startup are projected to require one year. Incremental working capital for this project is s90,000 beginning with startup. Sales from the contract are forecast at $380,000 each year. Variable costs are estimated at $250,000 the first year, and Jo believes they will decrease at the rate of $5000 per year, as they become expert in growing the new items in the new greenhouses
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