Luann and Dave Broiler maker are building three new broiler houses. They will house 20,000 broilers in each flock (house) and expect 6.5 flocks per year. Luann and Dave also expect a 5% death loss. Each broiler will weigh 4.0 lb. and sell for 0.04 cents per pound. Direct costs per broiler will be 0.043 cents.

They will invest $30,000 in land which is non-depreciable. They will also spend $10,200 on property with a three-year depreciable life and $60,400 on property with a ten-year depreciable life. The estimated terminal value (net of all capital gains taxes) at the end of 12 years is $35,000.

They will finance 70% of the total investment with debt at an interest rate of 9%. Their income tax rate is 30% and after-tax discount rate is 12%. They expect annual growth rates in receipts and expenses of 2%. The time horizon is 12 years. Depreciation is based on the modified ACRS, 150% declining balance with switch to the straight-line method and one-half first-year convention.

Determine the NPV and IRR for the investment. Should Luann and Dave make the investment? Why?

What is the MIRR of the investment?