Question 1

When should Suresh sell the trees? Critically evaluate your answer.

Alan's Tree Garden, SDN BHD Alan's Tree Garden, SDN BHD is doing well after its incorporation. Suresh Kumar, president, chief of operations, and majority shareholder, currently has a planting of 10,000 three-year-old Japanese dogwood trees in a recently introduced white-flowered variety. Kumar can sell this type of tree at a higher price than the more common red-flowered variety. The trees are now 6 feet tall on average and can command RM24 each. At present, Kumar has priced 8-foot trees at RM34 and 10-foot trees at RM40. Landscape contractors avoid trees larger than 10 feet tall because they are difficult to transplant successfully. With average weather, the 6-foot trees will be 8 feet tall in three years and 10 feet tall in six years. Suresh has to make financial decisions almost every day. Today's decision involves present value and future value computations, which Jake learned as a student at SEGi University. He wants to know if he should sell the trees immediately at 6 feet tall, three years from now at 8 feet tall, or six years from now at 10 feet tall. Current Market Value Size Age 6 3 years 8 RM24 6 years RM34 109 9 years RM40 Alan's Tree Garden, SDN BHD Alan's Tree Garden, SDN BHD is doing well after its incorporation. Suresh Kumar, president, chief of operations, and majority shareholder, currently has a planting of 10,000 three-year-old Japanese dogwood trees in a recently introduced white-flowered variety. Kumar can sell this type of tree at a higher price than the more common red-flowered variety. The trees are now 6 feet tall on average and can command RM24 each. At present, Kumar has priced 8-foot trees at RM34 and 10-foot trees at RM40. Landscape contractors avoid trees larger than 10 feet tall because they are difficult to transplant successfully. With average weather, the 6-foot trees will be 8 feet tall in three years and 10 feet tall in six years. Suresh has to make financial decisions almost every day. Today's decision involves present value and future value computations, which Jake learned as a student at SEGi University. He wants to know if he should sell the trees immediately at 6 feet tall, three years from now at 8 feet tall, or six years from now at 10 feet tall. Current Market Value Size Age 6 3 years 8 RM24 6 years RM34 109 9 years RM40