The Earthilizer Case CSM, Inc., is considering an investment in Earthilizer, a new organic fertilizer made from dairy farm waste Developed by CSM's ag-division over the past 3 years in response to: Growing demand from organic farmers More restrictions on the dsposal of cattle manure . Project will be "up and running by the end of 2007, with first year of sales in 2008 CSM financed from internally generated cash flows; firm is unlevered Very promising investment opportunity * Product has undergone extensive testing Product is wholly organic, and is cheaper than traditional Vpin Agrawal The Earthilizer Case Cont. Sales $1 million in 2008 Growing 10% annually throughout the 5-year planning Operating Costs * Operating expenses before depreciation are 10% of Straight-line depreciation period COGS 67 40% of sales sales (variable expenses) plus an annual fixed expense of $115K PPE 10-year life * zero salvage value 30% tax rate ipin Agrawa