Q : Present an itemised breakdown (and the total) for each of the following:

a)The cash flows at the start.

b) The cash flows over the life.

c)The cash flows at the end.

d) What is the NPV of the new tomato glasshouse?

1.listed on the Australian Securities Exchange following an Initial Public Offering (IPO) in 2015. Costa is a supplier of fresh fruit and vegetables to the major supermarket chains. Their brands include Driscolls berries and Blush tomatoes. Costa used part of the IPO proceeds invest in growth opportunities such as a new tomato glasshouse in the NSW regional city of Guyra. This glasshouse became operational in 2015 however, as stated in the investor presentation released to the ASX on 25/02/2016 it is already operating at capacity. Costas Growth Plan states that they are considering constructing another tomato glasshouse. Growing tomatoes in a glasshouse offers substantial advantages compared to field-grown tomatoes. Key benefits include the ability to grow tomatoes for 52 weeks of the year, crop protection from adverse weather events and temperature control. For these reasons the yield per hectare for glasshouse-grown tomatoes is ten times that for field-grown tomatoes. However, costs associated with the construction of a glasshouse and the annual operating expenses are substantial. Therefore, before Costa decides to invest in a new glasshouse a financial analysis that considers the costs and benefits must be performed to determine if it will contribute to increasing the wealth of Costa shareholders.

2.You are employed in Costas corporate finance department and have impressed senior management with your aptitude for financial analysis. This talent was developed through the practice-oriented assignments that you completed at University. You recall how exciting it was learning about listed companies by searching and reading company announcements made to the Australian Securities Exchange (ASX). The Chief Financial Officer (CFO) has asked you to perform a financial analysis of the tomato glasshouse using a purpose-built preformatted EXCEL spreadsheet. The CFO has suggested you liaise with company employees from a variety of different departments to collect the information that is necessary to perform the analysis. You will also search through public documents to identify some of the assumptions that will be required in your financial analysis. Your analysis will be provided to the Board of Directors who will formally decide whether to proceed with the new glasshouse, based largely on your recommendation.

3.The two major expenses associated with constructing a brand new glasshouse are $3 million for site preparation (i.e., excavation and grading) and the capital expenditure of $22 million for the glasshouse structure (excluding irrigation, as explained in paragraph 11). The directors are accountable to the shareholders and so a rigorous financial analysis is necessary to be confident that the investment in the new tomato glasshouse is justified. The following paragraphs contain a substantial amount of information that has been gathered from across the business and it is your job to determine which information is relevant to the analysis.