Bunyan Lumber, LLC Mini Case Now we can calculate the cash flow for each harvest schedule. One
Question:
Bunyan Lumber, LLC Mini Case
Now we can calculate the cash flow for each harvest schedule. 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. The NPV of each harvest schedule is the NPV of the first harvest, the
NPV of the thinning, the NPV of all future harvests, minus the present value of the
conservation fund costs.
40-year harvest schedule:
Revenue $40,359,135
Tractor cost 9,870,000
Road 3,525,000
Sale preparation & admin 1,269,000
Excavator piling 750,000
Broadcast burning 1,500,000
Site preparation 725,000
Planting costs 1,125,000
EBIT $21,595,135
Taxes 7,558,297
Net income (OCF) $14,036,838
The PV of the first harvest in 20 years is:
PV= $14,036,838/(1 + .0608)20
First PV = $4,315,09
Question: How did it reach to this conclusion?
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill