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Read the In Business Article, Investing in a Vineyard: a Cash Flows Perspective, on Page 634. Do you want to invest and start this vineyard
Read the In Business Article, "Investing in a Vineyard: a Cash Flows Perspective", on Page 634. Do you want to invest and start this vineyard business? Share your opinions with the class.
IN BUSINESS INVESTING IN A VINEYARD: A CASH FLOWS PERSPECTIVE When Michael Evans was contemplating moving to Buenos Aires, Argentina, to start a company called the Vines of Mendoza, he had to estimate the project's initial cash outlays and compare them to its future net cash Inflows. The Initial cash outlays Included $2.9 milllon to buy 1,046 acres of land and to construct a tasting room, $300,000 for a well and irrigation system, $30,000 for underground power lines, and $285,000 for 250,000 grape plants. The annual operating costs included $1,500 per acre for pruning, mowing, and irrigation and $114 per acre for harvesting. In terms of future cash InflowS, Evans hopes to sell his acreage to buyers who want to grow their own grapes and make their own wine while avoiding the work involved with doing so. He intends to charge buyers a one-time fee of $55,000 per planted acre. The buyers also would reimburse Evans for his annual operating costs per acre plus a 25% markup. In a good year, buyers should be able to get 250 cases of wine from their acre of grapevines. Source: Helen Coster, "Planting Roots," Forbes, March 1, 2010, pp. 42-44
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