Hello,

I am doing a finance case, Twilight Acre Farms, and I am trying to determine cash flows. I was not given a revenue figure, only that productivity will increase 15% with the new machine. I do not know what to do. It says in the case that excess capacity is worth $35/hour and 4 acres per hour will be processed. So, I tried to back into a revenue figure for this, but all of my cash flows are then coming up negative. What do I do with productivity???

Hi I still have the same issue, hou can I calculate the inflows?

Hello,

To determine the cash flows for Twilight Acre Farms, you need to consider various factors. Here's how you can approach it:

1. Calculate the revenue:
Since you don't have a specific revenue figure, you can estimate it based on the given information. You mentioned that the new machine will increase productivity by 15%. To determine the revenue, follow these steps:
- Calculate the existing revenue by multiplying the current productivity (in acres per hour) by the excess capacity rate ($35/hour). This will give you the revenue generated with the current equipment.
- Calculate the increased productivity by adding 15% to the current productivity.
- Multiply the increased productivity by the excess capacity rate ($35/hour) to get the estimated revenue generated with the new machine.

2. Consider the costs:
Next, consider the costs involved, such as the cost of the new machine, maintenance costs, labor costs, and any other relevant expenses. Subtract these costs from the estimated revenue to determine the net cash flow.

3. Account for depreciation:
Remember to account for depreciation of the new machine. Depreciation is the decrease in value of an asset over time. It is an important factor when calculating cash flows.

4. Assess other cash inflows and outflows:
Consider any additional cash inflows or outflows that are mentioned in the case but are not directly related to revenue and costs. This could include tax considerations, salvage value at the end of the machine's useful life, and any other factors relevant to the case.

By following these steps, you should be able to calculate the cash flows for Twilight Acre Farms. Remember to review the case carefully to ensure you have considered all the relevant information.