Bunyan lumber closing case solution

Bunyan Lumber, LLC, harvests timber and delivers logs to timber mills for sale. The company was founded 70 years ago by Pete Bunyan.

Bunyan lumber closing case solution

The PV of the first harvest in 35 years is: The effective year interest rate for the project is: The present value of these deposits is: Notice that when the NPV began to decline, it continued declining. This is expected since the growth in the trees increases at a decreasing rate.

So, once we reach a point where the increased growth cannot overcome the increased effects of compounding, harvesting should take place. There is no point further in the future which will provide a higher NPV.

Oct 27, at 8: Whatever harvest cycle the company chooses, it will follow that cycle in perpetuity. Since the forest was planted 20 years ago, the options available in the case are, 50, and year harvest cycles. No matter what harvest cycle the company chooses, it will always thin the timber 20 years after harvests and replants.

The cash flows will grow at the inflation rate, so we can use the real or nominal cash flows. In this case, it is simpler to use real cash flows, although nominal cash flows would yield the same result.

So, the real required return on the project is: The cash flow from the thinning process is: These costs are the same no matter what the harvest schedule since they are based on acres, not MBF.

Now we can calculate the cash flow for each harvest schedule.

Wace, Walter E.

One important note is that no depreciation is given in the case. Since the harvest time is likely to be short, the assumption is that no depreciation is attributable to the harvest. This implies that operating cash flow is equal to net income.

Now we can calculate the NPV of each harvest schedule.Bunyan Lumber, LLC, harvests timber and delivers logs to timber mills for sale. The company was founded 70 years ago by Pete Bunyan.

Bunyan lumber closing case solution

The current CEO is Paula Bunyan, the granddaughter of the founder. Most Common Text: Click on the icon to return to metin2sell.com and to enjoy and benefit. the of and to a in that is was he for it with as his on be at by i this had not are but from or have an they which one you were all her she there would their we him been has when who will no more if out so up said what its about than into them can only other time new some could these two may first then do.

Please Help with Homework Question 1 Solution: The company is faced with the option of when to harvest the lumber. Whatever harvest cycle the company chooses, it will follow that cycle in perpetuity.

Bunyan Lumber, LLC Closing Case: When should the company harvest the forest? Bunyan Lumber, LLC Closing Case: When should . is and in to a was not you i of it the be he his but for are this that by on at they with which she or from had we will have an what been one if would who has her.

Finance Chapter 9 Closing Case Bunyan Lumber Llc Closing Case: CH 9 When should Bunyan Lumber, harvest the forest?

Bunyan lumber closing case solution

The cash flow will . 1 Answer to Bunyan Lumber, LLC Closing Case: When should the company harvest the forest? Bunyan Lumber, LLC Closing Case: When should the company harvest the forest?

Bunyan Lumber, LLC, harvests timber and delivers logs to timber mills for sale. Solution: The company is faced with the option of when to harvest the lumber. .

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