StudentNotesLecture4–CostsandReturnsofVineyardEstablishmenta
ndOperationSlide1CostsandReturnsofVineyardEstablishmentan
dOperationVineyardModel10acresVitisviniferaChardonnaygrapeL
andalreadyownedSlide2Assumptions(conditions)Conservativecrop
yieldSmart-Dysonorverticalshootpositioned(VSP)trainingLabo
r$17.50/hrforoperatorlabor,$8.00/hrforunskilledlaborSlide
3Assumptions(conditions)Grapeprice$1,400pertonEquipmentpur
chasednewforvineyard-$73,500Table1.1,thesearefixedcosts
withsomevariablecostsSlide4Assumptions(conditions)Mixtureo
fownerequityandcommercialfinancing6%forequipment,7.5%annu
aloperating,?yearPestmanagementtypicalforChardonnaySlide5
ModelVineyardCosts(Table1.2)Year0(sitepreparation)-$1,52
7/acreYear1(planting,trellis)-$12,178/acreYear2(trellis,t
raining)-$4,480/acre,harvestincome$700/acreSlide6ModelVin
eyardCosts(Table1.2)Year3(pestmanagement,training,pruning
,harvest)–$5,285/acreharvestincome$2,800/acreYear4-25(matu
rebearing)–$6,259/acreharvestincome$5,600to$7,000/ASlide7
ModelVineyardSummary(Table1.3)TotalvariableandfixedcostsT
otalinterestTotalcostsplusinterestHarvestincomeAnnualcashf
lowCumulativecashflowSlide8ModelVineyardSummary(Table1.3)T
otalvariablecosts-$2,800/acreTotalfixedcosts-$1,200/acreT
otalcosts+interest-$6,000/acreCashflowpositive(year5or
?4)Slide9CumulativecashflowNegativethroughyear14Zerosorb
alancesoutinyear15Positiveinyear16andbeyondCostsamortiz
ed(spread-out)over25yearlifeofvineyardSlide10PriceSensit
ivityAnalyses(Table1.5)HigherpricepertonHigheryieldperac
reProfitabilitysoonerbecauseCostspaidsoonerLessinterestchar
gedSlide11VineyardEstablishmentCapital-intensiveenterpriseLong
-termapproachtorealizingprofitSlide12LoweringCapitalInvest
mentBuyingusedequipmentFindingalternateusesforequipmentHiri
ngservicesorleasingequipmentUsemoreofyourownmoneyandle
ssborrowedmoneyIncreasingvineyardacresSlide13VineyardOperat
ionsDifferDesign(site,acresplanted)Capitalinputs(fixedcost
s)Operationinputs(variablecosts)Yieldstability(welladaptedgrape)Materialpricing(quantityandsalepricing)Slide14LargecostitemsLandEquipmentLabor |
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