You are asked to calculate the NPV of a vineyard project by constructing a proper DCF model.

The current price of the relevant grapes is $tn Historically, grape prices have grown on average by per year and the standard deviation of the logreturns on Texas grapes has, historically, been Your client uses a WACC of for similar projects but is unsure whether this would be an appropriate RADR for this project. The land that your client is thinking of purchasing has a yield of tons of grapes per acre. Yields are not expected until years after the land has started to be cultivated. Capital expenditure is depreciated linearly over years, and the corporate tax rate is You are asked to advise on the optimal time to invest in a winery.

Given data:

Required investment to establish a vineyard $acre:

Year :

for land purchase

for equipment

for site preparation and planting

for Trellis construction

for Drip irrigation & install

for Cultural practices

Year:

for Cultural practices

Year:

for Cultural practices

Average Annual Operating Costs $acre:

for Chemical cost

for Labour

for Harvesting

for Maintenance

for Irrigation