Hello, I’m not sure how to treat theses questions. Do someone has any ideas?? ull MTN LTE2:59 PM@ 63%Ims.gimpa.edu.ghQUESTIUN TWOAn investor is planning to buy a run-down cocoa farmin a cocoa growing area for ¢5 million. The plantationof about 20 acres has purposed built-houses, offices,warehouses and a network of roads. On purchase, hewill immediately replant the entire plantation with anew variety of cocoa seedlings, which mature in 4years at a cost of ¢2 million. It is estimated that he willbe spending ¢700,000 p.a. on maintenance of theroads. In 8 years' time from now, all the infrastructureand buildings will be rehabilitated at an estimatedcost of ¢4,500,000. The investor required rate ofreturn is 8% and has calculated his risk premium tobe 4%. Income from the investment is expected to be¢2 million per annum for four years and then reducedto ¢1.5million per annum for the rest of theinvestment period. The economic lifespan of theseedlings from maturity is estimated at 6years.i. Calculate the total cost of the investment at the timethe cocoa reaches maturity.ii. How can the investor make provision for therehabilitation cost and what will be the effect on thenet income?iii. Should the investor undertake the investment?Why?

Solution- Answer - (i) Statement showing total cost of Investment at the maturity of cocoa Year…

An investor is planning to buy a run-down cocoa farm in a cocoa growing area for ¢5 million. The plantation of about 20 acres has purposed built-houses, offices, warehouses and a network of roads. On purchase, he will immediately replant the entire plantation with a new variety of cocoa seedlings, which mature in 4

An investor is planning to buy a run-down cocoa farm in a cocoa growing area for ¢5 million. The plantation of about 20 acres has purposed built-houses, offices, warehouses and a network of roads. On purchase, he will immediately replant the entire plantation with a new variety of cocoa seedlings, which mature in 4

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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