THE INVESTMENT ANALYSIS OF CEA HYDROPONIC SYSTEM GROWING BOSTON LETTUCE. Analysis by GUNES ILASLAN, Ph.D. Modified by Georgia Agricultural Education Curriculum Office July, 2002. Selected Locations of CEA Hydroponic Operations Economic Model and Methodology
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GUNES ILASLAN, Ph.D.
Modified by Georgia Agricultural Education Curriculum Office
Selected Locations of CEA Hydroponic BOSTON LETTUCE
Economic Model and Methodology
Operating and Production Costs
ConclusionsContents of The Presentation
Direct Variable Costs
Total Before Tax Cash Outflows
Indirect Variable Costs
Total After Tax Cash Inflows
Tax Savings from Depreciation
After Tax Net Cash Flow
Initial Investment Costs
Asset Replacement Costs
Salvage Value of
Net Present Value of Investment
Annual Production: 344,925 heads/year
Grower Price: Breakeven Price
FINANCING of the INVESTMENT BOSTON LETTUCE
50% Debt and 50%Equity
Cost of Equity: 14%
Loan Interest Rate: 8.5%
Discount Rate: 8%
(The Weighted Average Cost
of Capital After Taxes)
Seed, Fertilizer, Media, Oxygen, Plastic
Package, and Shipping Container
Electricity, Heating, Water&Sewer, Freight
Expenses, Telephone, Office Expenses, Labor
Insurance, Property Tax, Repairs and
One-way sensitivity analysis studying the impact of selected variables on the profitability of the investment.
Selected variables: product price, electricity, heating, labor costs, initial capital investment, tax rate, production level, shrinkage rate, and discount rate.
The variables were changed from +50% to –50% of the estimated baseline values.
Can be produced and transported at a lower cost to areas such as:
Product quality and importance of local production
State promotional programs
Survival of agriculture in metropolitan areas
Public policy question: Should CEA facilities receive breaks on utility rates as large industrial firms do?
Future of CEA