An acre of grapes has the following costs and returns. Establishing the crop costs $5,000 per acre immediately (time zero). At the end of the first and second years the grapes cost $900 per acre for upkeep, replanting, etc, with no cash inflow. At the end of the third year it costs $3,000 to put up fences for the vines. There is no cash inflow in period 4 as the vines do not produce and are still growing. At the ends of years 5-12 the grapes provide net returns of $1,700 per acre. At the ends of years 13-25 the grapes provide $2,200 net return per acre. Assume the land is worth $7000 per acre at the end of the 25 years when it will be sold. Use an annual interest rate of 7%
Find the NPV and IRR of this investment.