GRAPES OR FLOWERS CASE REPORT

EVALUATION 3, 25%

FINANCES FOR DECISION MAKING FALL 2021

GROUP: Lastenia González, Pamela Leyton, Luis Gutierrez

QUESTIONS:

a) What are the characteristics of the table grape market? What are the characteristics of
the flower market? (10 POINTS)
GRAPES: Import destinations with growth, value growth, Chile led the group with 23%
participation, Chile produces various varieties of grapes and with a large surface area.
FLOWERS: Reactivation of the flower business since 2011, very segmented floriculture. 2
domestic and export markets. Sustained increase in imports from 2005 to 2010.
Comparative advantages due to climatic factors. Final product quality which made bidders
stay.

b) What is the Initial Investment for each project? (10 POINTS)

Fixed assets
Detail Amounts $
Calla bulbs 15.250.000
Buttercup bulbs 6.230.000
Planting material 14.560.000
Irrigation system 12.480.000
Totals 48.520.000
Nominal assets
Detail Amounts $
Patents and permits 520.000
Start-up costs 1.250.000
Training 856.000
Totals 2.626.000

Fixed assets
Detail Amounts $
Planting material 10.540.000
Irrigation system 13.450.000
terrain machinery 8.580.000
Totals 32.570.000
Nominal assets
Detail Amounts $
Start-up costs 1.854.000
training 1.354.000
Totals 3.208.000
c) What are the estimated revenues for the flower and grape projects?
(15 POINTS)
Income
Export grape 9.00USD
Grape national sale 2.00USD
Income
Cleats 0.35USD
Buttercups 0.30USD

d) What are the estimated expenses for the flowers and grapes projects?
(15 POINTS)
Grape Expenditures
Detail Amounts $ %
Administrative salaries 1.505.841 11,88%
Personal nutrition 1.370.330 10,81%
Property rental 2.300.000 18,14%
accounting advice 2.900.000 22,87%
Fuel 375.991 2,97%
Contributions 93.688 0,74%
Electric power 455.186 3,59%
Printing costs 180.950 1,43%
DG Expenses 984.456 7,76%
Legal expenses 187.230 1,48%
Library supplies 73.874 0,58%
Office maintenance 363.946 2,87%
Vehicle maintenance 9.400 0,07%
Equipment maintenance 11.345 0,09%
Vehicle maintenance 248.965 1,96%
Phone 18.067 0,14%
Mobile phone 207.649 1,64%
Bank expense 1.313.112 10,36%
Interest L. of C. 79.507 0,63%
Total spends 12.679.537 221%

Flower expenses

Detail Amounts $ %
Management remuneration 8.200.760 33,09%
accounting advice 4.460.000 18,00%
Property maintenance and repair 1.461.846 5,90%
Technical advice 1.619.847 6,54%
Financial interests 1.807.368 7,29%
Transfer of personnel and documents 1.404.220 5,67%
Fuels and lubricants 638.459 2,58%
Mobile phone 576.484 2,33%
Maintenance and repair of machinery 606.186 2,45%
Phone 459.181 1,85%
General expenses 296.789 1,20%
Representation expenses 476.713 1,92%
Training 350.000 1,41%
Equipment maintenance and repair 297.955 1,20%
Freight and parcels 278.872 1,13%
Desk supplies 252.331 1,02%
Life insurance 247.911 1,00%
Personal nutrition 206.293 0,83%
Banking expenses 195.293 0,79%
Machinery rental 182.400 0,74%
Legal expenses 163.875 0,66%
Fixed asset cost 146.302 0,59%
Electric power 142.208 0,57%
General securities 118.604 0,48%
Import costs 85.152 0,34%
Printing costs 77.000 0,31%
Liquid gas 28.883 0,12%
Total spends 24.780.932 100%

e) Determine the Average Cost of Capital Rate (WACC) for the two markets considering
the following data: the average market profitability is 14% and the agribusiness risk, B
is 1.5 (25 POINTS)

f) Calculate and interpret the results of the Net Present Value, for both businesses if we
assume that: (25 POINTS)

FOR THE FLOWER MARKET:

FIRST YEAR FLOW= $23,500,000 AND GROWS BY 30% OVER THE PREVIOUS
YEAR FOR THE NEXT 4 YEARS

FOR THE GRAPES MARKET:

FIRST YEAR FLOW= $19,000,000 AND GROWS BY 35% OVER THE PREVIOUS
YEAR FOR THE NEXT 4 YEARS