Sugar Cane Harvesters Information Sheet Assumptions All cash flows are assumed to occur at the end of each year, except for capital expenditures…

Background Information[1]

Sweet Farmers is a sugar cane farm operating in North Queensland. The sugar cane harvester that is currently in use needs to be replaced before the next harvest as it has reached the end of its useful life.  The farm’s management is evaluating two different types of harvesters, namely , both very popular in the industry.

Management believes the should be purchased due to the fact that, despite the it has , can and has compared to the Combine Harvester.

The president of the company, Mr Candy, is not satisfied with management’s recommendation as no appropriate analysis has been conducted in support of this advice. Mr Candy is also aware that advances in the harvesting technology occur frequently and therefore will most likely look at new models when the recommended model reaches the end of its useful life.

The company has provided detailed information related to the two harvesting machine options in the ‘Harvesters Information’ spreadsheet.

Task

Mr Candy has requested that you . As both harvesters will harvest the same total amount of sugar cane each year, and therefore generate the same revenues, revenue is ignored in this analysis.

 The following requests have been made about the analysis and report:

–           The financial analysis is to be completed. The file is to be easily adjustable for different scenarios and all inputs must be with the analysis of each harvester type.

–           The report is to be short (600 words + 20% tolerance) and written in a manner that can be understood by a person with a basic understanding of financial analytical tools.

–           The report sections must be: Summary, Methodology, Recommendations and Limitations.

o Summary: outlines the task and advises of the recommendation.

o Methodology: must explain and justify the methodology employed.

In addition

o Limitations: must identify key limitations with the analysis.

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