3. Develop an Excel spreadsheet that is similar to the model below to evaluate the following five-year investment into a hop field. Conduct the analysis on a per-acre basis. Use a 4 percent discount rate.

• Initial investment cost = $8,095 per acre
• Investment life = 5 years
• Average hop price = $5.00 per pound
• Hop yield = 1,600 pounds per acre in year 1 and 2,000 pounds per acre in years 2 5
• Annual operating costs = $7,100 per acre in year 1 and $7,700 in years 2 5.

You can check the functioning of your spreadsheet by comparing to the results you completed for the in-class exercise. Develop the spreadsheet so that the discount rate is in a separate cell that is referenced when the discount factor is calculated. Print the spreadsheet.

1. Use the spreadsheet to conduct sensitivity analysis on the discount rate.

• What is the NPV of the investment with a discount rate of 5%?

• What is the NPV of the investment with a discount rate of 6%?
• What is the NPV of the investment with a discount rate of 8%?

• Does the profitability of the investment change at any of the higher discount rates?

• What is the approximate internal rate of return of the investment?

2. Use the spreadsheet to conduct sensitivity analysis on the price of hops?
   • What is the NPV of the investment with a hop price of $4.50 per pound?

• What is the NPV of the investment with a hop price of $5.50 per pound?

• Does the feasibility of the investment change at any of these prices?

Net Cash Flow Discount Factor Present Value Year Revenue Cost $ Nm7 D $ $ 2 3 4 5 $ $ $ | $ $ $ $ $ $ Investment Costs = $ NPV = $ Net Cash Flow Discount Factor Present Value Year Revenue Cost $ Nm7 D $ $ 2 3 4 5 $ $ $ | $ $ $ $ $ $ Investment Costs = $ NPV = $