find NPV and IRR

NPV and IRR

5. Cow Stable Improvements - The Livestock Feeding Manager is proposing to purchase Feed Pushing Robots in the cow stables. CVF accommodates 1,000 cows per stable. Based on the current herd size, there is a total of 4 stables to tend to. The feeding process is very labor intensive. Feed is pumped directly from the silos to the stables, but stable hands have to ensure that the feed is spread evenly among the cows. They also have to keep pushing the feed toward the cows to ensure that the cows have a steady supply of food. It is very important to manage a cow's intake of food as you want to regulate the production of milk and the milking schedule. Feed Pushing Robots can be programmed to distribute and push up feed any number of times, day and night, thus ensuring constant availability of feed. Research has shown that a constant supply of food is proven to increase milk production by 1% per cow, which is substantial. While CVF would experience labor savings of $65/cow/year, this continuous feeding is estimated to cost an additional $45/cow/year in feed cost. CVF would have to buy 8 robots, 2 for each stable. CVF was quoted $26,000 for one robot. Because the robots are active day and night, they only have a 3-year useful life, at which point they need to be replaced. They will be depreciated using the 3- year MACRS depreciation method. CVF believes the robots will have a $500 market value each at the time they need to be replaced. Additional working capital in the amount of $50,000 will be needed upfront, and recouped at the end of the 3 years. 2. Updated ear tags - each cow would be outfitted with a new Radio Frequency Identification (RFID) tag to replace the manual identification tag currently in use. The RFID tag would allow farm managers to track and monitor the cows more easily. For example, how much milk did she give? How long did it take her to milk? That information would automatically be added to each cow's individual record in the computer. That record would collect any and all information about her: her calving information, her vaccines, any health issues and how they were handled. All of this information can be viewed in word format and graph format so any abnormalities can easily be seen and can be promptly addressed in order to keep the cows healthier. CVF is especially interested in this project because the well-being of their cows is truly important to them and this system would enable them to individualize their care. CVF would have to invest in an RFID Software Package in order to track the cows. RFID tags are estimated to cost $217 per cow. The tags are very durable and they are transferrable from cow to cow. CVF would have to invest in a new computer system. Hardware and software cost is estimated at $300,000, with required maintenance costing $5,000 a year for the first 5 years, and $10,000 a year thereafter. There is no additional working capital requirements. While RFID would not have a positive increase in sales, CVF management believes that it can contribute to cost savings. It could eliminate 5 cow hand positions, thus saving $20,000 a year per position eliminated. It also believes that being able to keep the cows healthier will save them money in milk that they are currently throwing away when cows are sick and on antibiotics. CVF should be able to save $75,000 the first year as the system ramps up, with an increase in milk savings of 5% a year. Since the required maintenance on the system takes care of upgrades, CVF believes it can use the RFID system for 10 years before having to upgrade it. However, it will amortize the RFID system over a period of 5 years, using a 5 year MACRS depreciation schedule. There is no resale value for used RFID systems. 5. Cow Stable Improvements - The Livestock Feeding Manager is proposing to purchase Feed Pushing Robots in the cow stables. CVF accommodates 1,000 cows per stable. Based on the current herd size, there is a total of 4 stables to tend to. The feeding process is very labor intensive. Feed is pumped directly from the silos to the stables, but stable hands have to ensure that the feed is spread evenly among the cows. They also have to keep pushing the feed toward the cows to ensure that the cows have a steady supply of food. It is very important to manage a cow's intake of food as you want to regulate the production of milk and the milking schedule. Feed Pushing Robots can be programmed to distribute and push up feed any number of times, day and night, thus ensuring constant availability of feed. Research has shown that a constant supply of food is proven to increase milk production by 1% per cow, which is substantial. While CVF would experience labor savings of $65/cow/year, this continuous feeding is estimated to cost an additional $45/cow/year in feed cost. CVF would have to buy 8 robots, 2 for each stable. CVF was quoted $26,000 for one robot. Because the robots are active day and night, they only have a 3-year useful life, at which point they need to be replaced. They will be depreciated using the 3- year MACRS depreciation method. CVF believes the robots will have a $500 market value each at the time they need to be replaced. Additional working capital in the amount of $50,000 will be needed upfront, and recouped at the end of the 3 years. 2. Updated ear tags - each cow would be outfitted with a new Radio Frequency Identification (RFID) tag to replace the manual identification tag currently in use. The RFID tag would allow farm managers to track and monitor the cows more easily. For example, how much milk did she give? How long did it take her to milk? That information would automatically be added to each cow's individual record in the computer. That record would collect any and all information about her: her calving information, her vaccines, any health issues and how they were handled. All of this information can be viewed in word format and graph format so any abnormalities can easily be seen and can be promptly addressed in order to keep the cows healthier. CVF is especially interested in this project because the well-being of their cows is truly important to them and this system would enable them to individualize their care. CVF would have to invest in an RFID Software Package in order to track the cows. RFID tags are estimated to cost $217 per cow. The tags are very durable and they are transferrable from cow to cow. CVF would have to invest in a new computer system. Hardware and software cost is estimated at $300,000, with required maintenance costing $5,000 a year for the first 5 years, and $10,000 a year thereafter. There is no additional working capital requirements. While RFID would not have a positive increase in sales, CVF management believes that it can contribute to cost savings. It could eliminate 5 cow hand positions, thus saving $20,000 a year per position eliminated. It also believes that being able to keep the cows healthier will save them money in milk that they are currently throwing away when cows are sick and on antibiotics. CVF should be able to save $75,000 the first year as the system ramps up, with an increase in milk savings of 5% a year. Since the required maintenance on the system takes care of upgrades, CVF believes it can use the RFID system for 10 years before having to upgrade it. However, it will amortize the RFID system over a period of 5 years, using a 5 year MACRS depreciation schedule. There is no resale value for used RFID systems