Buccaneer Farms Ltd. is a large grain farm operation on the prairies. In the last few years significant droughts have detrimentally affected crop yields. To mitigate the risk of future droughts, management has decided to install a large irrigation system. The company owns land that borders a water source. To install the irrigation system, a diversion must be built which will disturb the land’s natural state. The local government has advised Buccaneer Farms Ltd. that it is responsible to restore the land to its original state when the irrigation system is removed. The cost of the components for the system is $350,000, installation costs are $45,000, training for the labourers is $5,000, and a new truck for the business to transport labourers to where the system is located costs $40,000. Management hired an engineering firm that estimates the present value of the future dismantling costs to be $25,000, and the present value of the cost to restore the land to be $55,000.

Instructions

What is the total asset value of the irrigation system?

Answer rating: 100% (QA)

The total asset value of the irrigation system would be the sum of the costs a... View the full answer