During the past year, Cindy McGill planted a new vineyard on 150acres of land that she leases

Fantastic news! We've Found the answer you've been seeking!

Question:

During the past year, Cindy McGill planted a new vineyard on 150acres of land that she leases for $31,840 a year. She has asked you, as her accountant, to assist her in determining the value of her vineyard operation.

The vineyard will bear no grapes for the first 5 years (1–5). In the next 5 years (6–10), Cindy estimates that the vines will bear grapes that can be sold for $64,820 each year. For the next 20years (11–30), she expects the harvest will provide annual revenues of $111,510. But during the last 10 years (31–40) of the vineyard’s life, she estimates that revenues will decline to $76,650 per year.

During the first 5 years, the annual cost of pruning, fertilizing, and caring for the vineyard is estimated at $8,330;during the years of production, 6–40, these costs will rise to$12,270 per year. The relevant market rate of interest for the entire period is 4%. Assume that all receipts and payments are made at the end of each year.

Click here to view factor tables- https://knowledgequity.com.au/wp-content/uploads/2015/08/KEQ-FV-and-PV-tables.pdf

Paul Button has offered to buy Cindy’s vineyard business by assuming the 40-year lease. On the basis of the current value of the business, what is the minimum price Cindy should accept? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to0 decimal places, e.g. 458,581.)