Question: A dairy farmer currently operating a 1 0 0 - cow herd is considering expanding his herd size by an additional 5 0 cows. The

A dairy farmer currently operating a 100-cow herd is considering expanding his herd size by an additional 50 cows. The expansion will require the purchase of 50 cows, building renovations, and acquisition of additional equipment. Operating revenues come primarily from milk sales. Here are the details. Planning Horizon -10 years Capital structure, debt to asset -34% debt cost -5.5% equity cost -11.5% income tax rate -20% annual growth/inflation rate -2.50% cows -50 price per cow - $2,600 building renovations - $250,000 equipment - $350,000 terminal value equipment - $60,000 annual depreciation - straight line change in revenue, year 1- $200,000 change in expenses, year 1- $95,000 change in working capital - $30,000 Create a model in Excel, find NPV, find IRR, find MIRR, find PI.

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